Investment planning

Question 1

Interest rate differential formula

Answer 1

((your rate - current rate) x mortgage o/s balance) x (remaining mths / 12)

Question 2

CSB needs to held onto for how long before it pays out interest?

Answer 2

90 days

Question 3

T-bill price formula

Answer 3

price = [face value (par value) / (1+ {yield x (# of days to mat/365)})]

Question 4

mortgage backed securities features

Answer 4

• the value fluctuates inversely with interest rates
• potential capital gains when sold
• interest fully taxable
• ACB is original cost - any accrued interest - principal repayment received

Question 5

ex dividend date is

Answer 5

2 days before record day

Question 6

dividend record day

Answer 6

is the day that dividends will be paid to shareholders

Question 7

calculate rate of return on margin

Answer 7

capital gain amount divided by amount you invested not including what was borrowed

Question 8

participating preferred share

Answer 8

rates to a pre-determined share of a company’s net profits over and above amount the specified dividend rate

Question 9

quick ratio formula

Answer 9

(current assets - inventories) / current liabilities

Question 10

debt equity ratio

Answer 10

total liabilities / total shareholder’s equity

Question 11

interest rate coverage ratio

Answer 11

(IBIT) income before interest and taxes / total interest expense

Question 12

net profit margin formula

Answer 12

net profit / net sales

Question 13

return on asset formula

Answer 13

net income / total assets

Question 14

Income trusts

Answer 14

are commercial trusts that invest in one or more operating companies and are designed to distribute cash flow to their investors

Question 15

Taxable capital gain

Answer 15

is half of capital gains calculated

Question 16

After tax inflation adjusted return formula

Answer 16

[(nominal return - (1- MTR)) - Inflation] / [1 + Inflation]

Question 17

callable bonds

Answer 17

gives the issuer the right to redeem the bonds after a specific amount of time

Question 18

puttable bonds

Answer 18

gives the issue the right to redeem the bonds at par value

Question 19

Right

Answer 19

opportunity to buy additional shares to maintain proportional ownership, small time window to do it. Exercise price is below mkt price

Question 20

warrant

Answer 20

allows share holders to buy a specific number of shares for a specific price over a longer period of time. . price is usually higher than market price

Question 21

Strategic asset allocation

Answer 21

benchmark asset mix designed to achieve the client’s long term goals and objectives

Question 22

Tactical asset allocation

Answer 22

taking advantage of perceived opportunities in short term fluctuations

Question 23

For a Fixed income with same coupon rate and yield, what happens when a change in yield occurs?

Answer 23

results in a greater price change for those with longer durations

Question 24

For bonds with the same maturity and yield, what happens when a change in yield occurs?

Answer 24

results in a greater change in price for lower coupon bonds