Investment characteristics

Question 1

Demand Deposits

Answer 1

Funds held at a financial institution that the owner may receive back immediately. Checking Accts, NOW’s (negotiable orders of withdrawal) Accts, money market Accts, some savings accts

Question 2

M1

Answer 2

Narrowest measure of the domestic money supply. Demand Deposits + Cash is M1

Question 3

CD’s (Certificate of Deposit)

Answer 3

Bank issued time deposit instrument. Part of M2 money supply

Question 4

Money market instruments

Answer 4

1. Short term 1 yr or less.
2. Liquid. Trade constantly.
3. Very safe. Investment grade or U.S. Treasury
4. Only debt, never equity.

Ex.) Treasury Bills, Commercial paper.

Question 5

Commercial Paper

Answer 5

A money market security. Maturity between 30 or 270 days (9 mo.)

Question 6

Fixed Income Securities (treasuries)

Answer 6

Treasury Bills (Max 1 Yr)
Treasury Notes (2 - 10 Yrs)
Treasury Bonds (10 Yrs +)
Bi, No, Bo

Question 7

Pricing for:
NOT T-Bills
T-Notes
T-Bonds

Answer 7

Done on $1,000’s.
Quote of 97 means 97% or $970
The .24 is actually 24/32 of 10$.
So Quote of .24 is 24/3210$ (0.75$10) is $7.50

So a Quote of 97.25 means 97% of $1,000 and 25/32*$10. So $977.50

Question 8

Pricing for:
T-Bill
NOT T-Note
NOT at-Bond

Answer 8

Quoted at discount off $1,000. Bid/Ask
Bid is what I SELL it for. Ask is what I BUY it for

ASK Price is 7.30. (7.3% of $1,000 is $73) so 1,000 - 73 is $927 is the Buy price for me.
BID Price is 7.45. (7.45% of $1,000 is $74.5) so 1,000 - 74.5 is $925.5 is the Sell price for me.

Question 9

Current Yield

Answer 9

Annual Interest Paid/Current Market Price

Question 10

Yield to Maturity

Answer 10

Overall return an investor will receive.

Question 11

Mutual Fund Dividend

Answer 11

Declaration Date. Then
Record Date. Then a business day later
Ex-Dividend Date

Question 12

Stock Dividend

Answer 12

Declaration Date. Then
Ex-Dividend Date. Then a business day later
Record Date.

Question 13

Balanced vs Blended

Answer 13

Balanced portfolios have both Fixed income and equities.
Blended has only Equities (growth and value type)

Question 14

12b-1 Fee

Answer 14

A few up to 0.75% of assets. Meant to cover costs associated with printing prospectus and sales materials and sales commissions.

Question 15

Breakpoints

Answer 15

A sales breakpoint is when you invest enough to the point you are qualified for different sales charges.
Ex. Having 100k invested would put you in the third discount group below.
INVESTMENT SALES CHARGE
less than 25k. 5%
25k-50k. 4%
50k-100k. 3%

Question 16

Average Price per Share vs. Average Cost per Share

Answer 16

Average Price per Share. price per share / how many times purchased.
Average Cost per Share. Total investment amnt / Total number of shares.

Question 17

Average Price per Share vs. Average Cost per Share example.

Answer 17

June. Invested 200$. Price/share 6$. # shares 33.
July. Invested 200$. Price/share 10$. # shares 20.
Aug. invested 200$. Price/share 9$. # shares 22.
Total. Inv. 600$. Price/share 25$. # shares 75

Ave Price/Share = $25 / 3 purchases. =$8.33
Ave Cost/Share = 600 / 75 Shares =$8

Question 18

Net Asset Value Calc

Answer 18

(Assets - Liabilities) / Shares

Question 19

Public Offering Price (POP)

Answer 19

The cost of buying shares at the public price plus the sales charge.

Question 20

Hedging

Answer 20

Quote everything in per share terms.
You buy 100 shares for $41
You buy a Put for $2.50. (Also goes for 100 shares)
Max Loss: Stock price goes anywhere below $40. You lose 1 dollar 41$ paid price - 40$ put price. (cuz you can get the 40$ price still with the put) You exercise your Put, premium of that put is $2.50. So 1+2.5=3.5. Or 3.5$ * 100 shares = 350$ total loss.

Breakeven point: You bought stock at 41$ and your Put premium is 2.5$. 41+2.5=$43.5 is the break even. If the stock price is above 43.5, you make money. If below 43.5, it will cost you that loss calculated above.

Question 21

Buy a Call.
Buy a Put.
Write a Call. Make money Short Term, Bearish. Caps upside to save on the downside.
Write/Sell a Put.

Answer 21

Right to Buy
Right to Sell
Obligation to Sell
Obligation to Buy

Question 22

IRR
NPV

Question 23

Alpha
Beta

Answer 23

-The difference between the beta and actual return of an investment.
-Measure of Volatility, systemic risk. 1.0 if same as market.