WAB Investments

Question 1

Bonds are affected by

Answer 1

DRIP

Question 2

Treasuries are affected by

Answer 2

RIP
(Zeros just IP)

Question 3

Markowitz Model uses

Answer 3

standard deviation not beta

Question 4

Anomalies contradict

Answer 4

The efficient market hypothesis

Question 5

A corp is most likely to issue new bonds when previously issued bonds are selling at a _____, interest rates have____ and are expected to _____

Answer 5

1) premium
2) fallen
3) rise

Question 6

When concerned about rising interest rates from inflation, buy a

Answer 6

Bond with a put feature

Question 7

Gross profit =

Answer 7

Income + growth / basis

Question 8

Publicly traded REITS are _______ and Mortgage REITS are ________

Answer 8

1) marketable
2) not liquid

Question 9

__________ don’t perform well during inflationary times

Answer 9

Mortgage REITS

Question 10

Non-public REITS & RELPS are

Answer 10

Highly illiquid and not marketable

Question 11

STRIPS are good for

Answer 11

Tax deferred accounts (pension, IRA, annuities, etc)

Question 12

Phantom income on OIDs are

Answer 12

Added to the basis

Question 13

Deferral of income applies to
1) I Bonds?
Or
2) TIPS?

Answer 13

Applies to I Bonds NOT TIPS

Question 14

Preferred stock has ________ than bonds

Answer 14

Longer duration and more price fluctuations

Question 15

Preferred stock _______ are not deductible for C corps, but ______ is

Answer 15

1) dividends
2) interest

(Interest is taxable and 50% of dividends are excluded from tax)

Question 16

Intrinsic Value of a property

Answer 16

NOI / cap rate

Question 17

At least ___ of REIT income must come from real estate (____ can come from securities like GNMA)

Answer 17

1) 75%
2) 15%

Question 18

If a REIT distributes 90%+ of net investment income, they

Answer 18

Only pay tax on the undistributed portion

Question 19

REIT distributions are_______

Answer 19

Ordinary dividends and may qualify for QBI deduction up to 20% of income (SEP, IRA, etc won’t pay tax)

Question 20

ADRs

Answer 20

But foreign shares in US (quoted in USD & dividends paid in USD but declared in foreign currency)

Question 21

Bankers Acceptance

Answer 21

Bank agrees to payment later for international trades (minimizes risk for future trades)

Question 22

Yankee Bonds

Answer 22

Bond denominated in USD and issued in the US by foreign banks/co. (Subject to US security laws)

Question 23

A negative correlation coefficient will
1)______ portfolio risk
AND
2) make Beta______

Answer 23

1) reduce
2) negative

Question 24

The Dow Theory

Answer 24

Is a method that is presumed to identify the top of a bull market and bottom of a bear market

Question 25

What are probability distributions

Answer 25

Normal, triangular, lognormal, and uniform

Question 26

Alpha shows ______ when returns on a managed portfolio are regressed against the returns on a market index

Answer 26

Return added by the PM

Question 27

In what way is a financial ratio considered to be most useful

Answer 27

Several ratios with the same industry over time

Question 28

If NPV = 0
If NPV is neg or positive

Answer 28

• then investment return = required rate of return
  -then investment return is less than or greater than the required rate of return (doesn’t mean it was profitable or not)