Miscellaneous Reading "Misses" Flashcards
what type of risks do CDs carry
interest rate risk
commercial paper
denominations of $100k
maturity is 270 days or less
sold at a discount
rated for quality
discount bond
par value is in excess of the bond’s purchase price
Yield ladder
*Discount bonds
Yield to call
yield to matuirty
current yield
nominal yield
current yield
yield to maturity
yield to call
*Premium bonds
bond interest accrues at what interval?
daily
STRIPS
treasury issued zero coupon bonds
direct obligation of the federal government
discount is treated as taxable income, earned annually
TIPS
treasury inflation protection securities
inflation protection
marketable
face value is adjusted semiannually to keep pace with inflation
are I bonds marketable?
no
GNMAs
direct guarantee of the US govt
NOT issued by the treasury
taxation of GNMA interest
taxable at federal state and local level
risks for GHMA bonds
interest rate and reinvestment rate
GO vs Revenue bonds
gos are backed by full faith and credit
safest type of mini credit
revenue are backed by a single source of income, trade at higher yields
bond risk
Default Risk
Reinvetment risk
Interest rate risk
Purchasing power rsik
Two bond rating agencies
Standard & Poor’s
Moody’s
conversion value of a bond
(par/conversion price)xCurrent market price of underlying stock
when is an issuer likely to call bonds?
if bond interest rates dropped in the market since the bond was issued
10Q vs 10K
qs are quarterly
ks are annual
both are from corporate management to the SEC
cumulative vs noncumulative shares
with noncumulative shares, missed dividends do not have to be made up
Unit investment trusts
no day to day portfolio managment
unmanaged
passive
no new securities are purchased, and securities are rarely sold
generally redeemed at NAV
mutual funds
OPEN end investment companies
redemptions are always at NAV
REITs are similar tooooooo
closed end investment companies
derivative
financial instrument whose value is based on an underlying asset
put options
holder has the right to sell
call options
give the holder the right to purchase
taxation for the writer of call options
- if the option lapses, the premium received is a short term gain
- if the option is exercised the premium received is added to the sale price (and then long or short term depending on how long it was held)
taxation for the holder of an option
not exercised = short term loss
taxability of punitive damages
generally taxable, regardless of the nature of the claim
exception: damages paid to a bene in conjunction with wrongful death are received tax free
