Investments Flashcards
Brokered CDs vs Regular CD risks
Brokered: RIP
Regular: RP
Current Yield
annual interest in dollars / bond’s market price
Who normally purchases STRIPS?
pensions/IRAs/annuities
because of phantom income
Does a Z tranche in a CMO bear a coupon?
NO
Put and Conversion features
benefit bond holder
come at expense of lower yield
For NOI, operating expenses exclude…
interest and depreciation
REITS
ordinary income, put in tax deferred
75% income must come from real estate
90% income must be distributed
qualifies for QBI up to 20%
Equity REIT
for growth
Mortgage REIT
Highly leveraged
makes income from spread
Inflation is bad for mort reits
What do short sellers do?
sell borrowed shares hoping that when they have to close the short sale the share price will be lower
LEAPs
expiration of 9 months to 3 years
once LEAP exercises, must hold for 12 months
EEs and STRIPS are NOT subject to which risk?
reinvestment risk because they bear no interest.
subject to IP
Yield Curve shows what bonds?
different maturities
same credit ratings
Bond duration shows what risk?
Cashflow Risk
Markowitz includes which variables?
risk (standard deviation), return, and covariance
