Securities Flashcards
T Bills vs bonds?
T bills are sold at discount and mature at face value) they do not pay a particular fixed interest rate)
What signal would a T.A. issue for a stock with a big increase in trading volume?
Buy
What is a spot price?
current price which an investor can buy/sell an instrument
What is a European option?
An option that con only be exercised on expiry date
when do call options expiry?
3rd Friday of the month
If you buy a put, are you long or short?
Long
Characteristic of closed end mutual funds?
Given laws of supply and demand, and since no new shares are issued, they can trade above NAVPS
Are front end charges included or excluded from ACB?
Included.
What is the ask risk rule?
On real estate investments, losses that can be claimed are limited to the capital deemed to be at risk.
Limited partnership in real estate advanatges?
Ideal vehicle for tax shelters with real estate:
* Losses can flow through to partners
* limits liability
* can require less capital relative to property value
Min holding period for LSIF?
8 years
What is yield to call?
Bonds yield if held to specific call date
current yield vs yield to maturity?
CY: Annual income / current price
YTM: total return if held to maturity (more comprehensive)
What are sinking fund bond ? Risk?
A fund set aside to ensure debt obligation is paid in full by maturity. (essentially, they call X% of a bond issue each year)
Lower the risk of default for investors
What is immunization strategy?
Matching bond duration to investors holding period to minimize/eliminate effect of interest rate changes on investor.
Basically, you can simply hold the bond to maturity
How do real return bonds work?
Adjusts the face value based on inflation. Because payments are based on face value, payments, too, are indexed to inflation.
E.g.
10K bond at 6%, inflation of 1.5% last year, this years face value is 10150.
What is the most senior debt?
First mortgage bonds
What is a debenture?
Bond secured only by creditworthiness of issuer
What is an income bond?
Bond that pays interest only if the company is profitable.
What is a put/retractable bond?
Bond that the holder can call of specific dates (lower risk)
Extendable bond?
Allows holder to extend term to maturity
Who gets accrued interest on a bond if it is sold?
The buyer (though this will be reflected in the price of the bond)
What is riding the yield curve?
Purchasing long duration bonds for short periods (to work, we need a positively sloped curve)
main factor in whether rental income is property or business income?
and kinds of services provided.
Maturity amount on a real return bond/
Original face value x total inflation since issue (crazy).
What is expectations theory?
Current long term bond rates forecast future short term rates
What is market segmentation theory/
Yield curve just represents supply and demand of bonds of various terms by bigger players (i.e., life insurance companies, banks).
What is bond duration?
the approximate % change in bond price for a 1% change in rates
How would a bond with duration of 10 respond to an increase in interest rates of 1% down?
+10% price.
What costs are deductible by a rental prop owner?`
Ins. premiums
rent collection fees
legal fees
prop tax
mortgage interest
utilities
lawn maintenance
regular maintenance charged
What is the capital cost allowance?
deduction for depreciating assets, and costs to maintain those assets are factors in (e.g. reno materials and labour) but not short term maintenance
How is the deduction for a split (owner occupied & rental) unit calculated?
Based on square footage OR # of rooms occupied by tenant and all costs that benefit the tenant as well are split on that basis (e.g., if 50/50 then half, e.g., prop tax is deductible)
How does CAA factor into a property sale?
Capital gains (sale price -original cost- cap expenditure) + CCA = taxable income
Max capital cost allowance?
Lesser of net rental income or maximum undepreciated capita cost allowance rate
Can losses on a rental offset cap gains or employment income?
Yes and Yes
What is the ex dividend date?
When a trade needs to be settled to receive dividends
* 2 business days before the date of record.
Are dividends always taxed higher than cap gains?
NO, depends on the province
How is intrinisc value calc. by the dividend valuation growth model?
(Dividend X (1+ expect growth)) / (Required %return - expected div gwt)
What is a board lot? Odd lot?
Depending on value of share:
Under 10C: 1000
10C to 99C: 500
$1+: 100
An odd lot is any other number of shares
How can one outperform the market under Efficient Market Hyp?
You cannot consistently outperform
3 forms of EMH?
Weak: all past info is priced in
Semi-Strong: all public info
Strong: all info
What are rights issued to shareholders?
They can be traded, usually the exercise price is set below market price at time of issue. Expiration is very short, usually a couple of weeks. Often, mutliple rights are need per new share (e.g., 3:1)
If you purchase stock with rights during the ex rights period, are you entitled to the rights?
no
