WAB Investments Flashcards
Bonds are affected by
DRIP
Treasuries are affected by
RIP
(Zeros just IP)
Markowitz Model uses
standard deviation not beta
Anomalies contradict
The efficient market hypothesis
A corp is most likely to issue new bonds when previously issued bonds are selling at a _____, interest rates have____ and are expected to _____
1) premium
2) fallen
3) rise
When concerned about rising interest rates from inflation, buy a
Bond with a put feature
Gross profit =
Income + growth / basis
Publicly traded REITS are _______ and Mortgage REITS are ________
1) marketable
2) not liquid
__________ don’t perform well during inflationary times
Mortgage REITS
Non-public REITS & RELPS are
Highly illiquid and not marketable
STRIPS are good for
Tax deferred accounts (pension, IRA, annuities, etc)
Phantom income on OIDs are
Added to the basis
Deferral of income applies to
1) I Bonds?
Or
2) TIPS?
Applies to I Bonds NOT TIPS
Preferred stock has ________ than bonds
Longer duration and more price fluctuations
Preferred stock _______ are not deductible for C corps, but ______ is
1) dividends
2) interest
(Interest is taxable and 50% of dividends are excluded from tax)
Intrinsic Value of a property
NOI / cap rate
At least ___ of REIT income must come from real estate (____ can come from securities like GNMA)
1) 75%
2) 15%
If a REIT distributes 90%+ of net investment income, they
Only pay tax on the undistributed portion
REIT distributions are_______
Ordinary dividends and may qualify for QBI deduction up to 20% of income (SEP, IRA, etc won’t pay tax)
ADRs
But foreign shares in US (quoted in USD & dividends paid in USD but declared in foreign currency)
Bankers Acceptance
Bank agrees to payment later for international trades (minimizes risk for future trades)
Yankee Bonds
Bond denominated in USD and issued in the US by foreign banks/co. (Subject to US security laws)
A negative correlation coefficient will
1)______ portfolio risk
AND
2) make Beta______
1) reduce
2) negative
The Dow Theory
Is a method that is presumed to identify the top of a bull market and bottom of a bear market
What are probability distributions
Normal, triangular, lognormal, and uniform
Alpha shows ______ when returns on a managed portfolio are regressed against the returns on a market index
Return added by the PM
In what way is a financial ratio considered to be most useful
Several ratios with the same industry over time
If NPV = 0
If NPV is neg or positive
- 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)
