Knowledge Gaps - Cash, bonds, property & equities Flashcards
What are NS&I index linked savings certificates?
Lump sum invested for 5 years, guaranteed tax freereturns linked to RPI
What are NS&I income bonds?
Pay monthly income and don’t have a set term, holder can take money out without notice
Is interest taxable on income bonds?
Yes
What are NS&I fixed interest savings certificates?
Fixed rate of return over a period of time and tax free on maturity
What is a bond’s nominal value?
the amount when a bond is first issued
How do you work out the nominal value of a bond?
e.g 10k x 110 (quote price)/ 100 = £11k
What is the tax treatment of bonds held outside an isa?
Income is subject to income tax at marginal rates
Are gains from disposal of a bond subject to CGT?
No
What is a treasury bill?
Short term borrowing issued by gov for 3 months etc, very liquid
What is a conventional bond?
Bonds with a fixed coupon & maturity date (4% treasury Gilt 2024)
What are index linked gilts and how do they protect against inflation?
Interest & capital payments are adjusted in line with inflactio
When are gilts shorts, mediums, longs & ultra longs?
Shorts - up to 7 years left
Mediums - 7-15
Longs - 15+
Ultra longs 50+
What is the name for a corporate bond that has been secured on specific assets?
A debenture
What is the differenc between a fixed & floating charge for corporate bonds?
Fixed - charge placed on co’s permanent assets
Floating - General charge on those which flow more generally through business (stock etc)
What type of corporate bond is a Floating-rate
notes (FRNs)?
A bond which is fixed for a certain epriod, then variable
What type of corporate bond is a convertible bond?
Can convert them to ordinary shares at certain points of the life of the bond
What happens if the bondholder doesnt convert a convertible bond in the lifetime of the bond?
Reverts to a conventional bond that repays at a fixed date
What type of corporate bond is a zero-coupn bond?
No interest paid but more will be paid on maturity
What type of institution would issue Core capital deferred
shares?
A building society
What are the two main classes of share capital for equities?
Ordinary shares
Preference shares
Give 2 examples of ordinary shareholders rights
Share of the profits
Voting rights
Entitled to residual value of the compny’s assets on liquidation
What are redeemable shares?
Shares issued when a company wants to return capital to shareholders
How are redeemable shares also known?
B shares
What are ‘A’ ordinary shares?
Non-voting ordinary shares
What are deferred shares?
Shares which only pay a dividend after a certain period
What are the rights of preference shareholders with regards to dividends?
Entitled to fixed dividend every year if co has the profits
What are the rights of preference shareholders with regards to a company’s liquidation?
Have priority over ordinary shareholders on liquidation
What are non-cumulative preference shares?
Preference shares which carry a fixed dividend, but lose the right if it isn’t paid
What are cumulative preference shares?
If a divi isn’t paid in one year, company needs to pay it before the current year’s divi is paid
What is a participating preference share?
Fixed divi received as well as additional divi for proportion of ordinary dividend
What are redeemable shares?
Co will pay nominal value of the shares at a set date
What are convertible shares?
Can change preference shares to ordinary shares at a set date and on set terms
What taxes are dividends subject to?
income tax and coprotation tax post allowance
What is the annual dividend allowance?
£500
What is a REIT?
An investment company that invests in and owns real estate assets
How can an investor invest in a REIT ?
By investing in shares on the stock exchange
What are the 2 components of a REIT?
1) Property investment & letting business
2) Property management business
Which compnonent of the REIT is ring-denced for preferential tax treatment?
the property investment & letting business
How much of the gross profits of the ring fenced business needs to be generated for a REIT to keep its preferential tax treatement?
75%
