Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFP Flashcards > Investments > Flashcards

Investments Flashcards

You may prefer our related Brainscape-certified flashcards:
CFP® flashcards
1
Q

Primary markets and issues are regulated by the _____________.

A

Securities Act of 1933

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Secondary markets and issues are regulated by the __________.

A

Securities Act of 1934

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Market Order

A

Sell ASAP at current price (most common)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Limit Buy Order

A

Wait for limit price or lower to buy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Limit Sell Order

A

Wait for limit price or higher to sell

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Stop Order

A

When price gets hit, turns into a market order

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Stop Limit Order

A

Combines features of a stop order and a limit order

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Investment Advisors Act of 1940

A

Requires advisors to register with the SEC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

DOL Rule

A

Established best interest standard and put fiduciary standards on ERISA accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Holding Period Return
Formula (Not from formula sheet)

A

[(Ending Value - Initial Value) + Income Generated] / Initial Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Holding Period Return (is/is not) indexed for time

A

Is not

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Holding period return assumes dividends (are/are not) reinvested

A

are not

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Holding Period Return
Capital Appreciation Component

A

(Ending Value - Initial Value) / Initial Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Holding Period Return
Income Yield Component

A

Income / Initial Value

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Dollar-weighted return (does/does not) account for when investments are made and when withdrawals occur

A

does

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Time-weighted return is based solely on the __________ or __________ of the portfolio from period to period

A

appreciation;depreciation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Total Risk = __________ + __________

A

Systematic Risk, Unsystematic Risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Which type of risk can NOT be eliminated through diversification?

A

systematic risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Systematic risk is quantified by what statistic?

A

Beta

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Types of Systematic Risk

A

“PRIME”

Purchasing Power Risk
Reinvestment Risk
Interest Rate Risk
Market Risk
Exchange Rate Risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Types of Unsystematic Risk

A

Business Risk
Financial Risk
Default/Credit Risk
Regulation Risk
Sovereignty Risk

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

The probability of a return falling within +/- 1 standard deviation of the average is ___%

A

68%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

The probability of a return falling within +/- 2 standard deviations of the average is ___%

A

95%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

The probability of a return falling within +/- 3 standard deviations of the average is ___%

A

99%

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

__________ refers to the extent to which a distribution is not symmetrical

A

Skewness

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

__________ skewed distributions have many outliers in the upper, or right tail

A

Positively

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

__________ skewed distributions have many outliers in the lower, or left tail

A

Negatively

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

__________ is a statistical measure that describes when a distribution is more or less peaked than a normal distribution

A

Kurtosis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Normal distributions are also known as __________

A

mesokurtic

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

A distribution curve that is more peaked than normal is known as __________

A

leptokurtic (slender)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

A distribution curve that is less peaked than normal is known as __________.

A

platykurtic (broad) (“platy is flatty”)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Investors who accept the Efficient Market Theory would be __________ investors and buy only index funds

A

passive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Efficient Market Hypothesis
Strong Form

A

Inside Information - No
Fundamental Analysis - No
Technical Analysis - No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Efficient Market Hypothesis
Semi-Strong Form

A

Inside Information - Yes
Fundamental Analysis - No
Technical Analysis - No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Efficient Market Hypothesis
Weak Form

A

Inside Information - Yes
Fundamental Analysis - Yes
Technical Analysis - No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Efficient Market Theory
Anomalies

A
  • Low P/E Effect
  • Small Firm Effect
  • Neglected Firm Effect
  • January Effect
  • Value Line Phenomenon
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

The __________ __________ curve identifies the optimal amount of return given a unit of risk taken

A

efficient frontier

38
Q

The efficient frontier uses _________ for the risk measure

A

standard deviation

39
Q

All points on the efficient frontier curve are deemed equally __________

A

efficient

40
Q

Points __________ the curve are deemed inefficient

A

below

41
Q

Points __________ the curve are deemed impossible

A

above

42
Q

Where you plot on the efficient frontier curve is determined by __________ __________

A

risk tolerance

43
Q

Risk averse investors have (steep/flat) indifference curves

A

steep

44
Q

Risk tolerant investors have (steep/flat) indifference curves

A

flat

45
Q

The Sharpe Ratio measures the risk-adjusted performance of a portfolio in terms of __________.

A

standard deviation

46
Q

The Sharpe Ratio is appropriate to use when R2 ____ 0.70

A

<

47
Q

Sharpe Ratio is a (comparative/absolute) value

A

comparative

48
Q

The higher the Sharpe ratio, the (higher/lower) the risk-adjusted rate of return

A

higher

49
Q

The Treynor Ratio is appropriate to use when R2 ____ 0.70

A

>

50
Q

The Treynor Ratio is a (comparative/absolute) value

A

comparative

51
Q

The higher the Treynor Ratio, the (higher/lower) the risk-adjusted rate of return

A

higher

52
Q

The Treynor Ratio measures the risk-adjusted performance of a portfolio in terms of __________

A

Beta

53
Q

CAPM is used to quantify __________ __________ given a market return and a Beta to the market

A

expected return

54
Q

CAPM is used top plot the __________ __________ __________

A

security market line

55
Q

CAPM
Market Risk Premium

A

(Rm - Rf)

Also known as the equity risk premium

56
Q

CAPM
Stock Premium

A

(Rm - Rf)Bi

Return of the market less the risk free rate times Beta

57
Q

Once CAPM produces the expected return, it can be subtracted from the __________ return to determine alpha

A

actual return

58
Q

What is another name for Alpha?

A

Jensen’s Performance Index

59
Q

What does Alpha quantify?

A

Risk-adjusted rate of return

60
Q

Alpha is only valid when R2 _____ 0.70

A

>

61
Q

Alpha is a (comparative/absolute) value

A

absolute

62
Q

Does Alpha use Beta or standard deviation?

A

Beta

63
Q

When Alpha is above the Security Market Line (SML) (or positive)…

A

performance was better than expected

64
Q

When Alpha is on the Security Market Line (SML) (or zero)…

A

performance was as expected

65
Q

When Alpha is below the Security Market Line (SML) (or negative)…

A

performance was less than expected

66
Q

The _____ _____ plots the rates of fixed income securities from very short-term securities all the way out to thirty-year maturity securities

A

yield curve

67
Q

Yield Curve
Upward Sloping

A

Normal, positive
The rates of short-term paper are lower than the rates on longer-term paper

68
Q

Yield Curve
Flat

A

Rates of short-term and longer-term paper are similar

69
Q

Yield Curve
Downward Sloping

A

Negative, inverted
The rates of short-term paper are higher than the rates of longer-term paper

70
Q

An inversion of the yield curve is indicative of a looming __________

A

recession

71
Q

The yield curve is a function of both the __________ _____ and ___ ______

A

business cycle; Fed policy

72
Q

The (short/long) end of the yield curve is sensitive to Fed policy

A

short

73
Q

The (short/long) end of the yield curve is a market rate and is predictive of anticipated economic conditions

A

long

74
Q

Bond valuation is a function of:

A
  • the bond’s coupon payments
  • the market rate of interest for comparable bonds
  • the amount of time until maturity
  • maturity value
75
Q

Compounding frequency for bond calculations

A

semi-annual

76
Q

The stated or coupon yield of a bond

A

Nominal yield

77
Q

The annual income paid divided by the current market price of the bond

A

Current Yield

78
Q

________ is used to estimate the sensitivity of a bond to changes in rates

A

Duration

79
Q

Yield to Worst is the lower of _____ __ ________ and _____ __ ____

A

Yield to Maturity; Yield to Call

80
Q

As interest rates rise, bond prices (rise/fall)

A

fall

81
Q

Discount Bond Yields
Highest to Lowest

A

Yield to Call
Yield to Maturity
Current Yield

82
Q

Premium Bond Yields
Highest to Lowest

A

Current Yield
Yield to Maturity
Yield to Call

83
Q

Duration is always stated in _____

A

years

84
Q

For normal income-producing bonds, duration will always be (shorter/longer) than maturity

A

shorter

85
Q

For zero-coupon bonds, the duration and years to maturity will be ___ ____

A

the same

86
Q

Duration (increases/decreases) with maturity

A

increases

87
Q

A higher coupon will result in a (higher/lower) duration

A

lower

88
Q

Duration tends to (over/under)estimate risks from rising interest rates and (over/under)estimate benefits from lowering interest rates

A

over; under

89
Q

Matching the duration of a fixed income portfolio to an investor’s time horizon _________ those assets

A

immunizes

90
Q

Longer duration = (more/less) sensitive to interest rate changes

A

more

91
Q

Which systematic risks does portfolio immunization lower?

A

Reinvestment risk and Purchasing Power risk

92
Q

Duration is a (linear/curved) estimate

A

linear

CFP Flashcards (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions