Last stitch effort Flashcards
Which act requires disclosures of new securities in the primary market
The Securities Act of 1933
Which act focuses on the trading of securities in the secondary market
The Securities Exchange Act of 1934
Which act regulates investment advisers and requires registration with the SEC for firms or any individual advisers with assets under management exceeding $100 million.
The Investment Advisers Act of 1940
Which act forms the backbone of financial regulation and established the foundation for mutual funds and hedge funds.
The Investment Company Act of 1940
Which efficient market hypothesis believes that market prices are functions of historical prices and volume.
**Asset prices reflect only historical pricing and volume information.
**Technical analysis does not result in out-performance.
Weak Form Efficiency
Which efficient market hypothesis believes that market prices are functions of publicly available information
**includes data such as firm information as well as economic information.
** fundamental analysis will not result in out-performance.
Semi-Strong Form Efficiency
Which efficient market hypothesis believes that market prices are functions of all relevant information (which includes private information plus bot the first and second data set)
**asset prices reflect all relevant information, including private information, therefore technical analysis fundamental analysis, nor the use of private information result in performance.
Strong Form Efficiency
Annualized Return formula
Geometric Mean Return formula
If the question wants me to solve for Dollar Weighted Return what function on the calculator do you solve for?
IRR
Treynor formula
Portfolio Return - Risk-Free Rate
/
Beta
Sharpe formula
Portfolio Return - Risk-Free Rate
/
Standard Deviation
Jensen Alpha formula
Portfolio Return -
[Risk-Free Rate + Beta (Market Return - Risk-Free Rate)]
Approximately 95% of outcomes fall within __________ standard deviations from the mean
2 standard deviations
Approximately 99% of outcomes fall within __________ standard deviations from the mean
3 standard deviations
when calculating standard deviations which two variables are used?
weight & standard deviation
CAPM formula
Rf+b (Rm-Rf)
the point of tangency where ________ & ________ meet is referred to as the market portfolio, which is a portfolio of all risky assets
CML & efficient frontier
Total Market Value formula
Operating Cash Flow
/
(Required Rate of Return – Dividend Growth Rate)
Total Market Value / Outstanding Shares
Intrinsic Value
what is the primary purpose for a money market account?
to give investors exposure to money market securities through indirect ownership.
A fixed-income security that is not backed by any specific collateral is known as a
Debenture
Accrued Interest formula
Semi-Annual Coupon Payment * Days since last coupon payment
/
Days in coupon period
Treasury bonds are subject to which type of taxation?
Federal only
Municipal Bonds are subject to which type of taxation?
No taxation unless the owner of the Muni bond lives in a different state where the Muni Bond is from, then the investor must pay state taxation.
Corporate bonds are subject to which types of taxation?
Federal and State
Annual coupon payment in dollars
/
Current market price
=
Current Yield formula
If interest rates increase, then bond prices will _______ while the returns on reinvested coupons will _______.
decrease, increase
Dividend
/
EPS
=
Payout Ratio
(net income - preferred stock dividends)
/
weighted average number of common shares outstanding
=
Earnings Per Share
Total annual dividends per share
/
Stock price
=
Dividend Yield
An investor who sells a stock short
must cover any dividends payments made by the issuing company.
Maintenance Margin formula
Account Value - Debt
/
Account Value
Account Value formula
Debt
/
(1-maintenance margin)
traditional UIT invest solely in
bonds
this type of fund has a fixed capitalization, since they cannot issue additional shares to the public
closed-end investment companies.
AKA mutual fund.
is the most common investment company used by investors, the fund manager continually accepts new capital and continually redeems shares.
Open-End Investment Company
Net Asset Value formula
market value of assets - market value of liabilities
/
Total outstanding shares
The primary purpose of derivatives
to transfer risk among market participants. Derivatives may be used to hedge against risk or to seek higher returns with a speculative investment.
what is the riskiest position for an options trader?
shorting a stock
Which options strategy could limit downside risk without costing anything out of pocket?
A collar
Which options strategy involves buying a call option to protect a short position?
Protective Call
Which options strategy involves combining a long position and a long put option?
Protective Put
Is also known as portfolio insurance.
which options strategy involves combining a long put and a long call, with the same strike price and expiration date?
long straddle
which options strategy involves combining a short put and a short call, with the same strike price and expiration date?
short straddle
when does an investor use a long straddle?
when they believes that the price of the security is likely to move up or down significantly, but don’t know which way it will go.
when does an investor use a short straddle?
when they believe that the price of the security is fairly stable. If correct, the investor will keep the premium for both options, however the investor has unlimited loss potential.
strangle
is the same thing as a straddle except it does not have the same strike prices and expiration dates.
According to the Black-Scholes option pricing model, the value of a call option will decrease
As the exercise price increases
A covered call is the most appropriate strategy for investors looking for
additional income from a stock they already own
