Miscellaneous Flashcards
American Opportunity Tax Credit
UP to $2,500 per eligible student (100% of first $2,000 of qualifying expenses, 25% of second qualifying expenses)
40% refundable (up to $1,000)
First 4 years of post-secondary- MUST be pursuing a degree or a recognized education credential
Double dipping - education tax credits
No dollar amount, have to choose from option other than 529, AOTC, LLC) - like gift from grandparents or savings
Lifetime learning credit
UP to $2,000 per return (20% of 10,000 in qualifying expenses)
Nonrefundable
Room and Board
Not eligible for EITHER education credits
Housing Cost Ratio (Front End or Mortgage Debt Service)
PITI / Gross Household Income
Be sure to convert to monthly
Should be less than or equal to 28%
Total Debt Ratio (Back End or Debt Repayment Ratio)
PITI + Monthly Consumer Debt / Monthly Household Gross Income
Should be less than or equal to 36%
Consumer Debt Ratio
Monthly Consumer Debt / Monthly NET Household Income
< 20%
Efficient Market Hypothesis
Helps investors determine their investment style
States that stock market is is efficient and all stocks reflect all relevant information and are priced in equilibrium
Anomalies do not disprove the EMT
Passive investors
Investors who ACCEPT EMT (would buy index funds)
Random walk theory
Movements of stocks is unpredictable
Lacks any pattern that can be exploited by an investor
Weak form
Believes: insider trading and fundamental analysis can help
Some benefit to active trading
Semi-strong
Only insider information
Some benefit to active trading
Strong form
Market is so efficient that inside info, fundamental or technical WON’T give you an advantage.
Efficient frontier
Identifies optimal amount of return given a unit of risk taken
Standard deviation as a measure
Points below = inefficient, Point on curve= equally efficient, Point above= impossible
Risk averse will have steep indifference curves, risk tolerant will have flat indifference curves
