Investments

Question 1

Why would a corporate treasurer buy preferred stock?

Answer 1

If a corporation’s treasurer buys preferred stock, then at least 50% of the dividends are excluded from tax.

Individuals are taxed at LTCG rates for preferred dividends .

Question 2

How do the taxes of REITs work?

Answer 2

REITs are a conduit pass-through arrangement. They don’t pay taxes at the corporate level. Passes through to investors.

Question 3

Do mortgage RETIs do good or bad during times of inflation?

Answer 3

Bad. Inflation is bad for mortgage REITs

Question 4

Can intrinsic value of a call be negative?

Answer 4

No. Intrinsic value cannot be negative.

Question 5

What is considered an accredited investor for a private placement (Regulation D)?

Answer 5

1-2-3 test. Having net worth of $1 million not including personal residence, or an individual with an annual income of $200,000, or a couple with a joint income of $300,000.

Question 6

How many non-accredited investors can there be in a private placement (Regulation D)?

Answer 6

35

Question 7

What is considered a qualified investor for a private placement?

Answer 7

Owns at least $5,000,000 in assets

Question 8

True or false the Dow Jones industrial average is price-weighted?

Answer 8

True

Question 9

What does beta measure?

Answer 9

Beta is a measure of a stock, systematic risk. Beta expresses volatility rather than variability and expresses only systematic risk.

Question 10

If interest rates increase what happens to duration?

Answer 10

If interest rates increased duration decreases. Inverse relationship.

If the normal yield curve moves upward, interest rates have increased and duration decreases.

Question 11

Do shorter or longer bond durations indicate greater price and sensitivity when interest rates change?

Answer 11

Longer duration. Longer bond duration, indicate greater price sensitivity with interest rate rates change.