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CFP (Self Created) > Investments > Flashcards

Investments Flashcards

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1
Q

Details on T-Bills

A
  • Maturity of one year or less
  • Issued on a discounted yield basis
  • Risk-free rate of the market
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2
Q

Banker’s Acceptance

A

Used to finance imports and exports

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3
Q

What are Yankee Bonds?

A

Dollar denominated bonds issued in the US by foreign banks.

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4
Q

When is a corporation most likely to call its bonds?

A

If bonds are selling at a premium, or if interest rates fall.

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5
Q

Details on Treasury Bonds

A
  • 30 year maturity
  • Sold on a yield to maturity basis
  • Can be called
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6
Q

True or False: STRIPS are Zero Coupon Bonds

A

True

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7
Q

Which tranche has the longest duration and highest yield?

A

Z Tranche

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8
Q

What is a debenture?

A

A general debt obligation backed ONLY by the integrity of the borrower.

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9
Q

Preferred Stocks vs. Bonds

A

Preferred stocks don’t have a fixed maturity date.

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10
Q

Investment Company Act of 1940 - What do they define as “investment companies”?

A
  • Open end funds
  • Mutual Funds
  • Closed end funds
  • UITs
  • Variable annuity companies
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11
Q

Can REITS invest in limited partnership interests?

A

NO

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12
Q

Buying Puts - Bearish or Bullish?

A

Bearish

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13
Q

Buying Calls - Bearish or Bullish?

A

Bullish

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14
Q

Liquidity vs. Marketability

A

Liquidity means that something can be sold quickly without a substantial change in price.

Marketability only refers to the speed of the transaction, i.e. T Bonds or Common Stock.

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15
Q

What is a weakness of IRR?

A

It doesn’t take into account reinvestment rates.

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16
Q

What happens if you match duration of a bond to a client’s investment horizon?

A

You eliminate interest and reinvestment rate risk.

17
Q

Formula for the Dividend Discount Model

A

(D(1+growth rate)) / (required rate of return - growth rate)

18
Q

A risk averse investor will have a _________ indifference curve.

A

Steep

19
Q

EMH suggests that financial planners should select securities based on….

A

Risk-Return Profile

20
Q

What kind of info should an Investment Policy Statement contain?

A
  • Client’s objectives and constraints
  • Desired return and level of risk
  • Liquidity, time horizon, taxes, and regulatory restrictions.
21
Q

Ex Dividend Date / Record Date

A

To receive a dividend, you must purchase stock BEFORE the ex-dividend date. Ex-dividend date is set two days before the record date so you need to buy three business days before the record date.

22
Q

If a U.S. Investor bought Canadian Bonds, what would they want to happen to the Canadian Dollar?

A

For the Canadian Dollar to strengthen.

23
Q

Name some examples of investments that are NOT liquid

A

ETFs
Government Bond Funds
Tech funds

24
Q

Does the Markowitz Model use Beta?

A

NO

25
Q

Is a Pension Plan likely to purchase STRIPS?

A

YES

26
Q

T Bills and T Bonds. Which is callable?

A

T Bonds are callable. Bills are not.

27
Q

Mortgage REIT and Equity REIT. Which would do better in inflationary times?

A

Equity REIT. Can use leverage.

28
Q

Big difference between Yankee Bonds and ADRs?

A

Yankee Bonds reduce exchange rate risk.

29
Q

How would you calculate cost per share?

A

First, divide dollar amount by cost of shares lot by lot to calculate the number of shares per lot.

Second, add up the number of shares bought.

Last, divide the total dollar amount by the number of shares.

30
Q

Is bond quality part of the indenture agreement?

A

no.

31
Q

Which of the following are not a guarantee of the U.S government: GNMA or CMO

A

CMO

32
Q

What must you remember about the intrinsic value of an option?

A

It can NEVER be negative.

33
Q

What corporate reports are filed with the SEC?

A

10Q and 10K

34
Q

What is the relationship between correlation coefficient and beta?

A

A negative correlation will reduce portfolio beta.

35
Q

Shortcut for calculating standard deviation for a portfolio?

A

Add risk percentages and divide by number of funds. Look for next lowest answer.

36
Q

Would an employee of a firm be considered an insider?

A

No

37
Q

Correlation between two assets calculated as…

A

Covariance / (standard deviaton 1 x standard deviation 2)

38
Q

Do Zero Coupon Bonds need to be accreted?

A

Yes.

CFP (Self Created) (10 decks)

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