SIE 6-8 Flashcards
Date when dividend is annouced
Declare date
Date on which a person must own the stock to receive the dividend
Record date
Date when stock deducts the dividend, usually one business days before record date (bc settlement date is T+2, unless in cash which is same date)
Ex-Date
What is the impact of stock dividends
no economic gain or loss for holder, no change to issuer’s capitalization, and no change to holder’s percentage of equity. no income or cap gain tax.
Current yield
annualized dividend / current market price
Bond prices have an inverse relationship with interest rates but bond yields have the same relationship with interest rates
True
Nominal Yields on Bond
Same as coupon, fixed annual interest rate
Current Yield on Bonds
annual interest payments / current market price (NOT PAR PRICE)
Yield to Maturity aka the Basis or “the Yield”
- Includes semi-annual interest payments, interest earned from reinvesting the interest (compounding or time value) any gain / loss of the difference between current value and par value
Yield-to-Call
An investors yield if a bond is called at par.
If a bond is callable you should quote what?
The lower of YTC or YTM (referred to as yield to works)
If a callable bond is selling at a discount use what? If a callable bond is selling at a premium use what?
Discount use: yield to maturity
Premium use: yield to call
Represents the total amount paid to acquire a security, typically includes commissions and other fees paid
Cost basis
Result of the sale or redemption of an assets if the proceeds exceed the basis (holding period is measured trade date to trade date)
Capital gains
Short term cap gains (less than 1 year) are taxed at
Ordinary rates
Long term cap gains (greater than 1 year) are taxed at
max 20%
The result of the sale of an asset if the proceeds are less than basis
Capital Loss
Amount of the original investment received by the investors is considered
return of capital
Total return calc
(ending value - beginning value) + investment income / begin value
Real rate of return calc (inflation adjusted)
Rate of Return - Inflation
Risk-Adjusted Return calc
Rate of Return - less risk free return
Risk-Free Return calc
Rate of Return generally found on a US treasury bill
Broad based indexes examples
S&P 500 (mostly NYSE stocks) and Down Jones (breakdown of three averages, industrial, transportation, and utility)
Indexes that focus on market segments
narrow based index
the largest index and the smallest indexes
Largest - Wilshire, Smaller is Dow Jones
Funds that tract the investment performance to indexes
Passive - benchmark or index funds
The Bond Buyer Index is based on which of the following securities?
Municipal bonds
During periods of rising interest rates, an investor can expect
Long-term bond prices to fall more than short-term bond prices
Diversified Mutual fund qualifications
75% of total assets must be specifically structed so that no more than 5% is invested one company and no more than 10% of a company’s voting stock is owned
Who sets the objectives for Mutual Funds
Board of Directors
What is the largest expense of a mutual funds
Investment Management fee
A wholesalers / distributor of a mutual fund, appointed by the board, receives a portion of the sales charge, able to buy shares at NAV
Underwriter
funds invest in small companies and often participate in the initial
public offerings of these companies’ shares. The stocks of these companies can be very volatile, but
historically they have also produced high returns for long-term investors
Aggressive Growth Funds
funds concentrate their investments to stocks in a particular
industry (e.g., high tech stocks or pharmaceuticals) or in a particular geographic location.
Specialized or Sector Funds
Mutual funds that focus on foreign securities are often the easiest
way for U.S. investors to invest abroad
International and Global Funds
