sie chapter 2 pt 3 Flashcards
facs and uits are managed or not managed
once the portfolios are composed they are changed or not changed
no managed
not changed
do facs and uits trade in the secondary market
they are redeemable only through the
no
issuer
actively manages a securities portfolio to achieve a stated investment objective
managed investment company
raise capital for its portfolio by conducting common stock offering, much like any publically traded company that raises capital to invest in its business
initial offering of shares is limited
closed end investment companies(publically traded funds)
what determines the bid price(price at which investor can sell and ask price(price at which investor can buy)
supply and demand
closed end investment companies only investment company security that trades in secondary market
T or F
T
Closed end investment companies may issue
common stock, preferred stock, and debt securities
only issues one class of security, which is common stock
open end investment companies(mutual funds)
mutual funds themselves can purchase
common stock, preferred stock, and bonds
an insurance contract designed to provide retirement income
annuity
because an annuity can provide an income for the rest of someone’s life, the contract has a
mortality guarantee
if the investment manager of an insurance company is responsible for selecting the securities to be held in the separate account, the second account is
directly managed and must be registered under the investment company act of 1940 as an open end management investment company
if the investment manager of the insurance company passes the portfolio management responsibility to another party, the separate account is
indirectly managed and must be registered as a unit investment trust under the investment company act of 1940
fixed annuity promises
who is at risk
a stated rate of return
insurance company
mutual funds are redeemable or not redeemable
redeemable
redeemable securities means that
they do not trade in the secondary market
class a(front end load) shares
have front end sales charges loads, the sales charges are paid at the time an investor buys shares and the sales charge is taken from the total amount invested.
Class b(back end load shares)
back end sales charge is paid at the time an investor sells shares previously purchased(has them redeemed)
Class c(level load Shares)
have a one year 1% cdsc, a 75% 12b-1 fee and a .25% shareholder service fee
no load shares
fund does not charge any type of sales charge.
short term buying and selling of mutual fund shares to take advantage of inefficiencies in mutual fund pricing
market timing
NAV=
total assets- total liabilities
a prospectus can or cannot be altered
cannot
Statement of additional information
Mutual funds(open end) and well as closed end funds are required tp have an sai available for delivery within 3 business days on an investors request without charge
Financial reports
the investment act of 1940 requires that shareholders receive financial reports at least semiannually.
an investment company must send a copy of
its balance sheet to any shareholder who requests one in writing between semiannual reports
fund companies are permitted to charge up to how much
8.5%
operating expenses
include salaries and administrative fees.
fund portfolio management fee
paid to those hired to manage the investments in the fund portfolio
every funds single greatest expense is the
this is charged
as a percentage of what
annual fee
annually as a percentage of the total assets under management
Permits a mutual fund to collect a fee for promoting, selling, or undertaking activity in connection with the distribution of its shares
12-1 asset- based fee
direction participation programs
unique forms of business that raise money to invest in real estate, oil and gas, equipment leasing, and other similar business ventures.
capital growth potential is achieved through
appreciation of property
cash flow income generated through
rent
tax deductions
from mortgage interest expense and depreciation allowances for “wearing out the building” and capital improvements
tax credits are
very strong incentives as they reduce tax liability dollar for dollar
intangible drilling costs
costs such as wages, supplies,, fuel, and insurance that have no salvage value when the program ends
depletion allowances
tax deductions that compensate the program for the decreasing supply of oil or gas after it is taken out of the ground and sold
limited partnerships
investment opportunities that permit the economic consequences of a business to flow or pass through to investors.
reits that are subject to disclosure documents(registered with the sec) are ____
the ones that are not registered with the sec are
public reits
private reits
if a reit is traded on the stock exchange then its
listed reit
an owner of a real estate investment trust holds
an undivided interest in a pool of real estate investments
reits are or are not investment companies
are
reits are or are not to be considered dpps
not
hedge funds are regulated or unregulated
considered unregulated as they currently do not have to be registered with the sec
hedge funds are unregulated but do require
investors to be a sophisticated investor(accredited investor)
it is unusual for hedge fund organizers to
also be investors in the fund
Exchange traded funds
invests in a specific group of stocks and generally does so to mimic a particular index
disadvantages of etfs
commissions
overtrading
market influences on price
advantages of etfs
pricing and ease of trading
margin can be sold short (MF cannot)
operating costs lower than MF
Tax efficiency
senior unsecured debt securities issued by a bank or financial institution.
exchange traded notes
company that manages a portfolio if real estate, mortgages, or both to earn profits.
organized as a trust in which investors buy shares or certificates of beneficial interest, either on stock exchanges or in the over the counter market
real estate investment trust
an open end management company may charge what amount annually and still advertise itself as a no-load fund
.25%
an investment established by states to provide other government entities such as cities or counties a place to invest funds short term is
LGIP
Variable annuities are ____ fixed annuities are ___
securities, not
a private unregulated investment company organized in such a way so as to invest and achieve high returns utilizing debt leverage and derivative products such as options and margin is
a hedge fund
risk that changes in the overall economy will have adverse effect on individual securities regardless of the company’s circumstances
Generally cause by factors that affect all businesses, such as war, global security threats, or inflation
systematic risk
no matter how diversified a portfolio of investments is, it will still be subject
systematic risk, you cannot diversify this away
risk that when overall market declines, so too will any portfolio made of securities the market comprises
market risk
a potential change in bond prices caused by change in the market interest rates after an issuer offers its bonds.
interest rate risk
risk that future cash flows – either coupons (the periodic interest payments on the bond) or the final return of principal – will need to be reinvested in lower-yielding securities
reinvestment risk
the effect of continually rising prices on investment returns
inflation risk
measures the volatility of an asset
beta
beta < 1= ___stable than the market
more
beta>1__stable than the market
less and would be more volatile than the market
the potential for an investor o lose some or all of her money–under circumstances unrelated to an issuers financial strength
capital risk
this is an operating risk, generally caused by poor management decisions
business risk
relates primarily to those companies that use debt financing
financial risk
risk that a bond might be called before maturity and an investor will be unable to reinvest the principal at a comparable rate of return
call risk
a period during which a bond cannot be called
call protection
the risk that a borrower will repay the principal on a loan or debt instrument(bond) before its maturity and thus
prepayment risk
the possibility that an investment denominated in one currency could decline if the value of that currency declines in its exchange rate with the us dollar.
currency risk
currency is quoted at the
spot rate
the risk that an investor might not be able to sell an investment quickly at a fair market price
liquidity risk or market ability risk
changes in the rules that a business must comply.
regulatory risk
results from changes in the law
legislative risk
potential instability in the political underpinnings of the country
political risk
capture the risk of country defaulting on its commercial debt obligations.
sovereign risk
