Investments Flashcards

You may prefer our related Brainscape-certified flashcards:
1
Q

Bonds with greatest interest rate risk?

A

Longer duration bonds = more sensitive the bond price is to interest rate changes
Bonds with lowest coupon = biggest duration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Investor that benefits most from the tax advantage of preferred stocks?

A

Corporations
The corporate dividend-received deductions are based on ownership. TCJA of 2017 updated the amounts. If a corporation owns 20% or less, the have a DRD of 50%. if 20% or more (and less than 80%) of the corporation paying the dividend is owned by the company receiving the dividends, then up to 65% of the dividend is tax free. If ownership is greater than 80% (affiliated corporations) the DRD is 100%.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

A Yield Curve Can Be Described As

A

The yield curve demonstrates graphically the relationship between long-term and short-term government debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What Does A Stock Dividend Signal?

A

The stock dividend is often taken as a favorable signal. It is used for acquisition, increased R&D or occasionally to fend off takeovers. It is more common to see large amounts of debt taken on to make the firm seem less attractive if large amounts of cash are required.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Muni Bond with Restrictive Revenue Base?

A

” The limited general obligation bond is a bond issued by an entity that has some ability to levy taxes to support itself (for example, a school district). However, this ability is limited when compared to that of the general taxing power of the state

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

12b1 Fee’s

A

Marketing / Distribution only

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Intrinsic Value of Put Option

A

Strike - Stock Price

If negative = 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

OID Bonds

A

I. The bond basis increases at a set rate each year.

II. The difference between maturity value and the original issue discount price is known as the OID.

III. The bond’s earnings are treated as exempt interest income.

IV. The bond was issued at a discount to its par value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Difference between open and closed mutual funds

A

Closed-end funds offer a limited number of shares, while open-end funds continually create new shares as new monies are obtained. Closed-end funds offer no price guarantees and do not always sell at net asset value.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is true about Preferred Stock?

A

I. Its market fluctuations are greater than the long-term bond market fluctuations.

II. It is more risky than debt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Printing Money

A

Treasury department prints money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Neglected Firm Effect

A

Firm that goes unnoticed
Underpriced
Superior earnings & rates of return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Value of a Firm

A

Net Earnings / Cap Rate

120,000 / .10 = 1,200,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Yield Curve

A

Demonstrates the relationship between long term & short term government debt

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Expectations Theory

A

Theory of the yield curve that attempts to explain the yield curve based on future rates of inflation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

CAPM

A

Used to plot something on the SML
Uses BETA
Quantify investors REQUIRED RATE of RETURN

Your required rate of return is CAPPPM

17
Q

Market Risk Premium

A

(RM-RF)

18
Q

SML

A

uses BETA

SMaL BETA

19
Q

On the Point of Tangency we have attained?

A

Optimal Portfolio

20
Q

Efficient Frontier

A

Measures what portfolios are attainable and unattainable