Things I got wrong Flashcards
What is the term for expressing the value of a future sum in terms of its value today by considering the prevailing interest rate?
Present value
What is the typical settlement period for Eurobond transactions?
T+2
What is the main limitation of using flat yield as a measure of bond returns?
It doesn’t consider capital gains or losses
Which type of bonds typically pay interest gross, making the buyer responsible for paying their own tax?
Eurobonds
Why were investors willing to buy bonds with negative yields in early September 2021?
To preserve the security of their capital
What does a puttable bond give the bondholder right to?
Redeem the bond early at a pre-agreed amount
What is the minimum number of shares required by a predator to gain control of a company?
> 50%
Which two terms can be used to describe a bonus issue?
Scrip issue and capitalisation issue
Would a company buy back its shares to execute orders from a number of investors?
No, this is called aggregation
Pre-emptive rights are associated with which type of offer?
Secondary offering
Why would a organisation choose to offer an introduction?
To increase liquidity of shares
After what period of time would a company on AIM be removed without a nomad or broker?
One month
What does a best-efforts agreement imply about the securities being offered?
High risk securities
How does underwriting benefit the issuing company?
It ensures that there is sufficient demand for the shares
Which organisation sets the rules to to becoming listed on the LSE?
The FCA
Why would investor confidence in a recently listed company suffer?
Volatility circuit breaker
How does an over-allotment option allow underwriters to achieve a more successful offering?
It allows underwriters to sell shares if they rise and buy back shares if they fall
How often are listed companies generally required to provide audited accounts?
Annually
When would investors accept a negative yield on a government bond?
When they require a safe place to deposit their funds.
Why would a company issue Global Depository Receipts?
To attract overseas investors
Why would a buyer of a government bond pay more than nominal value?
Available rates are lower than the rates available on the bond
Many cryptocurrencies are decentralised, what effect does this have?
Lowers counterparty risk and liquidity.
No need for centralised exchange.
Why is gross redemption yield more useful than flat when comparing bonds?
GRY accounts for gain or loss through to maturity
Why would a yield curve become inverted?
Through the expectation of a significant reduction in future interest rates
What is the usual shape of the yield curve when investors prefer more liquidity?
Normal, shape is upwards sloping and to the right
Will accept lower yield on shorter dated bonds
Are investment trusts allowed to borrow money?
Yes, they are companies.
How is the share price of an investment trust determined?
Supply and demand, they are closed ended so price may not be the underlying.
How do structured deposits benefit investors?
Protection of capital whilst having exposure to investments which may provide higher returns
Which type of US government security is zero coupon?
T-bills
What criteria is required to have a CIS described as regulated?
Local financial regulator must authorise local CISs and recognise foreign CISs
What is a income statement sometimes known as?
The profit and loss statement
What is the calculation for capital employed?
Equity + long term loans (liabilities)
Where would EPS be found on a financial statement?
Income statement
Which figure typically constitutes a company’s distributable earnings?
Net profit
Which entity in the EU issues EU bonds to cover its funding needs?
The European Commission
What is the maximum maturity period for Japanese Government bonds (JGBs)?
40 years
Which market is NOT considered as an example of a decentralised market?
Equities
Why might a strategic stake be accumulated in a company?
To influence the company and its operations
What do “quantity adjusting” (Quantos) structured products protect investors against?
Currency fluctuations
What does the quick ratio, also known as the acid test, exclude from its calculation?
Inventory
Which section of the cash flow statement typically includes interest paid?
Operating activities
Why has the volume of bonds traded on single dealer platforms fallen?
Banks have become less willing to allocate capital in the bond market
What is the formula for asset turnover?
Revenues / Total net assets
What is the formula for return on shareholders equity?
Net Income / Shareholders Equity
What is the formula for ROA/ROCE?
Operating Profit / Total net assets
What is the formula for the quick ratio?
(current assets - inventory) / current liabilities
What is capital expenditure?
Money spent to buy non-current assets, such as PPE.
How are bond ratings ordered?
More letters the better e.g. AAA > AA+
Letter takes priority, e.g. A- > BBB+
What does NYSE have that LSE doesn’t?
Open outcry trading
What is measure is used to target inflation?
CPI (Consumer Price Index)
Which of the measures of profit is stated after deduction of only the cost of goods sold?
Gross Profit
