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CFP Memorize > Investments > Flashcards

Investments Flashcards

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CFP® flashcards
1
Q

Significant w/ high R2

A

Alpha / Treynor/ Jensen calculation

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2
Q

Macro aspect of CAPM

A

Capital Market Line CML

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3
Q

Markowitz Model Input Variables

A

Risk (SD), Return, Covariance

Also: Correlation Coefficient

NOT Beta

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4
Q

Who normally purchases STRIPS?

A

Pension Plans

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5
Q

Feature to reduce risk on a bond

A

Put Feature

Allows the holder to redeem at specified intervals before maturity and receive face value

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6
Q

Significant w/ low R2

A

Sharpe / Standard Deviation

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7
Q

Safest among long-term corporate issues

A

Mortgage Bonds

Backed by real property owned by issuing corporation - can be sold in event of default

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8
Q

Floor Value of a Convertible

A

Greater of its bond price or conversion value

Will always sell for no less than that.

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9
Q

Guaranteed Investment Contracts (GICs)

A

Similar to CDs but issued by insurance companies.

Terms from 2-5 yrs, no market risk, but credit risk on part of the issuer.

Popular for DB plans

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10
Q

Accredited investor traits

A

1-2-3 test

$1,000,000 net worth

$200,000 income single

$300,000 income joint

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11
Q

Confidence intervals

A 
68% = 1 SD
95% = 2 SDs
99% = 3 SDs
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12
Q

Muni Bond Insurers

A

Assured Guaranty

AND

Berkshire

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13
Q

Investment grade

A

BBB and above

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14
Q

Junk Bonds

A

BB or lower

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15
Q

Current Yield formula

A

ANNUAL INTEREST ($) / BOND’s MARKET PX

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16
Q

Holding Period Return

A

HPR = {(Bond’s Market Px + Coupon) - Purchase Px} / Purchase Px

17
Q

High Reinvestment Rate Risk

A

Mortgage Backed Securities

18
Q

Subject to DRIP

A

Corporates and Munis

19
Q

Subject to RIP

A

Government Bonds

20
Q

Muni Bond Insurers

A

Assured Guaranty

AND

Berkshire

21
Q

Investment grade

A

BBB and above

22
Q

Junk Bonds

A

BB or lower

23
Q

Current Yield formula

A

ANNUAL INTEREST ($) / BOND’s MARKET PX

24
Q

Holding Period Return

A

HPR = {(Bond’s Market Px + Coupon) - Purchase Px} / Purchase Px

25
Q

High Reinvestment Rate Risk

A

Mortgage Backed Securities

26
Q

Subject to DRIP

A

Corporates and Munis

27
Q

Subject to RIP

A

Government Bonds

CFP Memorize (6 decks)

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