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Live Review / Wrong Answer / Misc. > Investments > Flashcards

Investments Flashcards

1
Q

For REIT shareholders, income received is considered

A

investment (not passive) income.

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2
Q

What is used as a measure of risk on the security market line?

A

Beta

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3
Q

What may be beneficial under the weak form of the EMH?

A

fundamental analysis, such as analyzing financial statements

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4
Q

Seed financing

A

funding for the purpose of research and development of an idea

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5
Q

First-stage financing

A

for initial manufacturing and sales

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6
Q

Bridge financing

A

for companies that expect to go public within approximately 1 year

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7
Q

Tactical asset allocation

A

Tactical asset allocation continuously adjusts the asset allocation and class mix in an attempt to take advantage of changing market conditions and overall investor sentiment.

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8
Q

Private activity bonds

A

Private activity bonds derive their debt service only from their revenues and do not depend upon the issuing municipality. More than 10% of the proceeds are used for private business use. They are issued by municipalities to provide local industries with funds.

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9
Q

What does a correlation coefficient of zero mean?

A

A correlation coefficient of zero means that the two stocks will move independently.

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10
Q

After tax yield

A

multiply

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11
Q

Taxable yield

A

divide

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12
Q

standard deviation measures

A

total risk (systematic & unsystematic

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13
Q

A distribution that is more peaked than normal

A

leptokurtic

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14
Q

A distribution that is flatter than normal

A

platykurtic

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15
Q

short selling

A

borrow, sell, buy, replace

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16
Q

The highest level of diversification will occur when the correlation coefficient is closest to

A

-1

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17
Q

Coefficient of variation (CV) =

A

standard deviation ÷ expected return

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18
Q

Selling a call

A

This is known as the covered call strategy and is used to increase the income of the portfolio when the price of the underlying stock is expected to remain flat for a period of time.

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19
Q

Capital Market Line

A

Focuses on portfolio rather than specific investment

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20
Q

Security Market Line

A

Specifies the relationship between risk & return for an individual asset

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21
Q

Liquidity

A

Described both transaction speed & stability of price

22
Q

Arithmetic mean

A

Aka simple return

23
Q

Risks of corporate and muni bonds

A

DRIP

Default risk
Reinvestment risk
Interest rate risk
Purchasing power risk

24
Q

Protective Put

A

Involves holding a long position in a stock and buying a put for the same stock

This entails a long position in both the stock and put

25
Q

Marketability

A

Refers only to the speed of a transaction

*can be sold quickly

26
Q

Standard deviation

A

Measures variability of returns used in a non-diversified portfolio and is a measure of total risk

27
Q

Net Operating Income (NOI)

A

Gross Rental Receipts
+
Non-rental income
=
Potential Gross income (PGI)
-
Vacancy and collection losses
=
Effective gross income
-
Operating expenses

*excluded interest & depreciation

28
Q

Eurodollars

A

A deposit in any foreign bank that is denominated in dollars

29
Q

Modern Portfolio Theory (MPT)

A

It assumes that investors must be compensated for assuming risk

30
Q

Yankee bonds

A

Yankee bonds are foreign issued and dollar denominated

not sold in the us. sold to yankees

31
Q

REITS - redeemable or not redeemable

A

NOT redeemable. They are negotiable and trade on exchanges

32
Q

Interest on federal bonds

A

Interest on federal bonds not subject to state and local taxes but IS subject to federal taxes

33
Q

which index is price-weighted?

A

Dow Jones (DJIA)

34
Q

which performance evaluation measures total risk?

A

Sharpe

35
Q

Treasury bills

A

No 9 month increment
*Bill can’t get pregnant

36
Q

Brokered CD’s

A

interest rate risk

37
Q

Traditional CD’s

A

no interest rate risk

38
Q

Commercial paper

A

money market 270 days or 9 months

39
Q

OID

A

most are zero coupon bonds

40
Q

GNMA

A

Government guarantee, but not issued by government

taxable at federal, state, and local levels

41
Q

Debenture

A

unsecured corporate bond

42
Q

LEAP

A

long term options ranging up to 2 years and beyond

43
Q

What is not used in Markowitz efficient frontier?

A

Beta

standard deviation is used

44
Q

Who are STRIPS normally purchased by?

A

tax-deferred entities

45
Q

Geometric return shortcut
yr 1 +30
yr 2 +40
yr 3 -40
yr 4 -20

A

yr 1 +30 = 1.30
yr 2 +40 = 1.40
yr 3 -40 = .60
yr 4 -20 = .80

1.30 x 1.40 x .6 x .8 = .8736

n = 4
I = solve
pv = always -1
pmt = n/a
fv = .8736

46
Q

Which can defer income, I bonds or Tips?

A

I bonds

47
Q

Z tranche coupon

A

there isn’t one. it functions like a zero-coupon bond

48
Q

convertible bond calculation

A

Par / conversion price x current market price of underlying stock

49
Q

_ % of all return outcomes will fall within + or - one standard deviation of the average or mean

A

68%

50
Q

_ % of all return outcomes will fall within + or - two standard deviation of the average or mean

A

95%

51
Q

_ % of all return outcomes will fall within + or - three standard deviation of the average or mean

A

99%

52
Q

RATS example if funds are mixed

A

choose the fund with the highest Sharpe

Live Review / Wrong Answer / Misc. (9 decks)

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