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Series 66 > Series 66 Chapter 6: Investment Analysis > Flashcards

Series 66 Chapter 6: Investment Analysis Flashcards

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Series 66 flashcards
1
Q

Three Contrarian Investing strategies

A

Odd Lot Theory Short Interest Put/ Call Ratio

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2
Q

Current Yield Formula

A

Annual Interest or dividends / Market (purchase) Price

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3
Q

If an investor reduces risk by selling an option they are?

A

Producing income or creating a partial hedge

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4
Q

Short Interest Theory

A

Short sellers must eventually buy back, therefore when short interest increases, Bullish

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5
Q

Risk adjusted return compared to standard deviation. Compares the actual rate of return to the risk free return on a T-Bill and to the standard deviation.

A

Sharpe Ratio

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6
Q

Sharpe Ratio Formula

A

SR = (actual rate of return - risk free rate of return) / SD

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7
Q

A method of evaluation an investment by estimating future cash flows while taking into consideration the time value of money.

A

Discounted Cash Flow

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8
Q

an imaginary portfolio of securities that are not actually held by the investor

A

Benchmark Portfolio

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9
Q

Used to create an optimal portfolio or efficient frontier (highest rate of return for the amount of risk in the portfolio)

A

Modern Portfolio Theory

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10
Q

Measure the rate of return on an investment company portfolio compared with a benchmark portfolio or index.

A

Active Rate of Return

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11
Q

Measure volatility of a stock in relation to the S&P 500

A

Beta

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12
Q

When must a margin account risk disclosure account be signed?

A

At or prior to opening account.

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13
Q

Who creates Forward Contracts? How are they traded?

A

Investors or traders. Privately, OTC. Not liquid or marginable

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14
Q

Put/ Call Ratio

A

More calls than puts - Bearish More calls than puts - Bullish

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15
Q

CAPM formula

A

CAPM = T-Bill Return + [(S&P 500 expected return - T-Bill) x Beta]

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16
Q

Percentage return that would be realized if an investment is held for a full calendar year.

A

Annualized Return

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17
Q

Total Return Formula

A

Net gains + income + appreciation - depreciation / amount invested

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18
Q

Formula for Annualized Return?

A

ROI x (365/days held)

19
Q

Evaluates percentage earned on investments in one year period. Considers the gains made on the investment, the appreciation, and the amount of income received.

A

Total Return

20
Q

Estimated rate of return based on the probability of a bullish, bearish, or normal market?

A

Expected Return

21
Q

A trial and error process to calculate IRR without a calculator.

A

Iteration

22
Q

the percentage of earned investments over an entire holding period. In this case, the investment is held over 1 year.

A

Holding Period Return

23
Q

Used to compare actual rate of return to required rate of return.

A

Net Present Value

24
Q

Passive Rate of Return?

A

Index rate of return

25
Q

Contracts that allow institutional investors to exchange risk on loans or bonds?

A

SWAP

26
Q

What is maintenance call is cash account?

A

25%

27
Q

Measures price volatility of bonds.

A

Bond Duration

28
Q

What is the formula for Future value?

A

FV= PV x (1 + R) (raised to the t)

29
Q

The rate of return necessary to obtain the future value required with the money presently invested.

A

Internal Rate of Return

30
Q

Risk Adjusted Return formula?

A

Stock appreciation - T-Bill with shortest maturity

31
Q

Formula for Alpha

A

Alpha = ROI / Beta

32
Q

Look at Page 97 and 98

A

Look at page 97 and 98

33
Q

If you have to find the investment with the highest NPV look for what?

A

The investment that pays the most in the shortest amount of time.

34
Q

Holding Period Return Formula

A

Gain-Loss / amount invested

35
Q

If an investor reduces risk by buying an option they are?

A

Hedging or protecting

36
Q

A transaction between two entities to buy or sell a specific commodity at a specific time in the future. Not liquid.

A

Forward Contracts

37
Q

the rate of return on an investment compared to the market risk of the security and is one way to measure risk adjusted return.

A

Alpha

38
Q

Based on the rate of return on T-Bills

A

Risk Free Rate of Return

39
Q

Odd Lot Theory

A

As odd lot volumes increase - Bearish As odd lot volumes decrease - Bullish

40
Q

Real Rate of Return formula

A

Actual return on investment - inflation

41
Q

What is maintenance call is margin account?

A

30%

42
Q

Rate of income return based on the market price of the security.

A

Current Yield

43
Q

Percentage earned compared to inflation

A

Real Rate of Return

44
Q

Risk of investing in stocks vs US Gov.bonds

A

Risk Adjusted Return

Series 66 (6 decks)

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