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CFP > Investment Planning > Flashcards

Investment Planning Flashcards

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CFP® flashcards
1
Q

Taxable Equivalent Yield (TEY)

A

Tax-exempt yield/
1-Marginal Tax Rate

Ex: Muni paying 5% @ 35% TB:
5/.65= 7.69%

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2
Q

Tax Exempt Yield

A

TEYx(1-Marginal Tax Rate)

Ex: Corp Bond Paying 7% @ 15% TB
7x(.85)= 5.95%

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3
Q

P/E Ratio

A

P/E Ratio equation:

Current Market Price=earnings x P/E Ratio

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4
Q

CV (Coefficient of Variation)=

A

Standard Deviation/Mean

  • Variability
  • Lower number is more predictable
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5
Q

Unsystematic Risk

A

Business Risk
Financial Risk, (leverage)
Diversifiable

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6
Q

Systematic Risk

A 
Part of a system, cannot be diversified PRIME
Market,
Interest, (bonds)
Reinvestment Rate, (bonds)
Purchasing Power, (bonds) and
Exchange Rate Risk
Measured by Beta
-With Unsystematic equals total risk-
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7
Q

Primary Bond Risks

A 
DRIP-
Default,
Reinvestment,
Interest
Purchasing Power Risk
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8
Q

Standard Deviation percentages

A

1 SD- 68%
2-95%
3-99%

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9
Q

Coefficient of Determination

A

R^2

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10
Q

Intrinsic Value of Real Estate (Rental)

A

Net Operating Income/Cap Rate

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11
Q

Zero Growth Model (used for preferreds)

A

V= Dividend/current yields

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12
Q

Geometric Return

A

Takes Compounding into account

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13
Q

HPR-Holding Pertiod Return

A

= Sale Price+Div-Old/Old Price

Margin Interest and Dividends

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14
Q

Record Date

A

Date in which shareholder is entitled to Dividend

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15
Q

ADR

A

American Depository Receipts
expressed in $$’s, not in local currency, registered with SEC
Still have exchange rate risk

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16
Q

Preferred Stock Valuation

A

Do/r = Annual Div/Current Market Int Rate

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17
Q

Futures

A

The Procedure for removing your downside risk by taking opposite position. Also limits upside.

18
Q

Muni Bonds-GO

A

General Obligation bonds are backed by taxing authority

19
Q

Revenue-Muni Bonds

A

Pay higher rate, backed by project, riskier

20
Q

STRIPS

A

Selling the coupon of a T-note as seperate securities. IE selling the 20th payment at 200k which will mature at 300k in 10 years

21
Q

Bond Yield– Current Yield

A

Annual Coupon Amount/Current Bond Price

22
Q

Yield Seesaw for Discount Bond

A

Lowest to highest Yield: Current Yield

YTM, YTC

23
Q

Yield Seesaw for Premium Bond

A

Highest to Lowest-CY, YTM, YTC

24
Q

Duration

A

Weighted Average amount of time it takes to get your money back on a bond
Zero Coupon bond has duration = to Maturity

25
Q

Duration Impacts

A

Maturity-Directly Related
Interest Rates-Inversely related
-Lower Coupon-higher duration
-Higher Couplon-Lower Duration

Lower the market rate-higher duration

26
Q

EMH-Strong Form

A

No one can beat the market (inside informaion does’t help)

27
Q

EMH-Semi-Strong

A

All public information is factored into stock price-insder info helps

28
Q

EMH-weak

A

Funamental Analysis works, no technical analysis.

29
Q

SML vs CML

A

SML is Micro and uses Beta, CML uses SD

30
Q

Monetary Policy

A

Controlled by Federal Reserve:
Through, Open Market Operations,
Discount Rate Changes,
Reserve Requirement

31
Q

Expansionary

A

Fed Buys securities from public,
Lower’s Discount Rate,
Lower’s Reserve Requirements

32
Q

Contractionary Monetary Policy

A

Sell Gov’t Securities-$$ transferred from public to Banks and Fed
Raise Discount Rate
Raise Reserve Requirement

33
Q

Valuation of Real Estate

A

NOI/Cap Rate

Net Operating income
Cap Rate is subjective, cannot really calculate

34
Q

Securities Act of 1933

A

Registrationn of IPO’s

Primary Markert, new issues with prospectus

35
Q

Securities Exchange Act of 1934

A

Created SEC,
Broker Dealers must register with SEC
Secondary Market

36
Q

Investment Co Act of 1940

A

Regulates MF’s and other investment Co’s

37
Q

Investment Advisers Act of 1940

A

Adviser must register with SEC (ABC rule)

38
Q

Securities Investors Protection Act of 1970

A

Protects against brokerage firm failures (SIPC)

39
Q

National Securities Markets Improvements Act of 1996

A

> 25MM: SEC Regulation,
<25MM: State Regulation
Raised to 100MM in 2012-Dodd-Frank Wall street reform Act, 2010

40
Q

Regulation FD 2000

A

Requires Companies to share Market moving info with the public at the same time it’s released to institutions, designed to level playing field

41
Q

Sarbanes-Oxley Act of 2002

A

Executive accountabiliity for Exec’s

CFP (8 decks)

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