Final Points Flashcards

Question

Detail payout for loans

Answer 1

- Only based on vested balance - 5 year payback unless for a mortgage 0-$20,000 = Lesser of 10K or account balance $20,000 - $100,000 = 50% account value 100,000 up = $50,000

Answer 2

``` -5 year term AND -Death -Disability -59.5 -First time home ```

Answer 3

ALL Plans - 59.5 - Death - Disability Qualified Plans - Age 55 and separated from service - QDRO - SEPP 72c =Equal payments of 5 years IRA (5) - College - Health Insurance - Home Purchase

Answer 4

``` Basically a general power of appointment but is limited to HEMS H - Health E - Education M - Maintenance S - Support ```

Answer 5

JTWROS = half step in basis. Note: If married % ownership is always 50/50 If not, you must look at % contributed, that will determine the half when looking at FMV Example: Pops 70% Son 30% 100K put into house(5K gift for the son bc you need 50% ownership) Pops dies, FMV of home = 200K Son now has a basis of 170K due to the amount receive from pops while still maintaining his contribution of 30% Community Property: Follows the will, so will always go through probate but only 50% of it will. The step is always 100% so in the last example new basis would be 200K

Answer 6

A - Power of Appointment/ Martial Trust C - QTIP (use the combo of C and B with another marriage kids) - Marital deduction still preserved ----------------------------------------------------------- B - Bypass/Family/Credit Shelter

Answer 7

40,000 The loan taken out by the partnership during the year increased Judy's basis by her 1/3 share of the $45,000 loan or $15,000. Judy's basis, therefore, increased from $25,000 to $40,000. Judy cannot deduct a loss from the partnership in excess of her basis (the amount she has “at risk”), so she can claim only a $40,000 loss. Note: It would state non-recourse debt if that was the intent of the question. The basis in a partnership will increase whenever liabilities increases, the increase is treated as a contribution of money to the partnership.

Answer 8

According to tax Regulations, no income on the rental of a vacation home for less than 15 days is included in gross income. However, when the home is rented out for 15 or more days and the taxpayer uses it less than 15 days or 10% of the rental (whichever is more), then the home is not considered a residence.

Answer 9

1. Duty of Loyalty (client's interest ahead of our own at all times) 2. Duty of Care (skill, prudence, and diligence) 3. Duty to follow client instructions (if reasonable and lawful)

Answer 10

Not providing choices b/c I want to think about how these accounts are actually used. When applying for the AOTC credit we must first look at AGI, the phaseout determines if it's even worth it for some of the actions we can take. Next, look at the accounts being used for college payments. In this case, we have a UGMA and a 529. To qualify for the credit, the parents will need to pay 4k of the expenses out of pocket. A distribution from a 529/UGMA can not be counted towards the credit. Next, we would cover the rest of the expense with the UGMA b/c we want to increase of chances of the child qualifying for financial aid.

Answer 11

So we are already given the PV of the Bond. From here all we need to do is multiply the PV by the rate of 1.11%. With that we get $593.45 That means we paid $58.81 was paid in the first year. Tp get the second, we do the same step $593.45 * 1.11 = 658.72 = $65.28 phantom tax

Answer 12

Generally, for a taxpayer who files a joint return and whose “combined income” (AGI + foreign income + tax exempt income + ½ of Social Security benefits) is above $32,000, up to 50% of Social Security benefits are included in income. If a MFJ taxpayer's combined income exceeds $44,000, up to 85% of Social Security benefits may be subject to taxation. In this case, Steven Myers will have to report one-half of the $45,000 he will receive as disability income insurance benefits because his employer paid one-half of the premiums. Since his combined income will be only $22,500 + $6,000 (which is ½ of his Social Security benefit), for a total combined income of $28,500, he will be below the $32,000 minimum and none of the Social Security benefits will be included in his gross income.

Answer 13

A surviving spouse under 60 years of age, who is caring for a child under age 16, is entitled to Social Security survivor's benefit equal to 75% of the deceased worker's PIA. In this case, 75% of $1,300 is $975. Each dependent, unmarried child under age 18 is also entitled to 75% of the worker's PIA. Since the deceased is survived by two dependent, unmarried children under 18 years of age, there are three family members who are entitled to a $975 monthly benefit. Their combined monthly benefit would total $2,925, which would exceed the maximum family benefit of $1,800 by $1,125. Therefore, the total excess is divided by 3, to calculate the amount by which each family member's benefit must be reduced, to stay within the limit, or $1,125/3 = $375. The monthly benefit for the spouse and each dependent child is $975 – $375 = $600, for a total of $1,800 in benefits for the family per month.

Answer 14

The time that is needed after the issue of the policy for the specific claims to be covered

Answer 15

When the insured doesn't give up the right to sue but refrain from such action until either a dollar threshold or a verbal threshold is reached.

Answer 16

A non-qualified plan (rabbi trust) is a irrevocable trust but, unlike a funded deferred compensation plan, the assets are subject to the claims of the employer's creditors. This avoids constructive receipt by the employee and delays income taxation until distribution. In an informally funded plan (Rabbi trust), the employee has the segregated assets as security of the agreement, assuming the employer remains solvent and the assets are not taken by the employer's creditors. This risk of having creditors take the assets inside a "Rabbi trust" is what constitutes a substantial risk of loss or forfeiture and keeps the employee from being considered in "constructive receipt" of the formally funded assets.

Answer 17

Step 1: calculate the standard deduction. The standard deduction for a dependent on another taxpayer’s return is the greater of $1,100 or earned income + $350 (up to a maximum of $12,400, the standard deduction for a single taxpayer in 2021), so her standard deduction is $4,850. Step 2: deal with the unearned income. The unearned income that is taxable is $1,600. The first $1,100 is tax free because it is covered by the standard deduction under kiddie tax rules. The next $500 is taxed to child at his own rate. (note: 1,100 tax free, next 1,100 at the child rate, anything above is at the parent's rate SECURE Act 2019) You have now used $1,100 of the standard deduction, leaving $3,750 to be used against earned income. Step 3: earned income is $4,500. Subtract the remaining $3,750 of standard deduction and that leaves $750 taxed to the child at her rate (she worked for it, so no kiddie tax). Step 4: check yourself: Total standard deduction $4,850 Total taxed at child rate $1,250 ($500 of unearned income + $750 earned income) Total taxed at parent's rate $0 Total $6,100 this accounts for all of the taxable income

Answer 18

``` Distributions: 1. Annuity 2. Lump sum O- One taxable year R - Retire E- Entire Balance 3. Rollover 4. In service withdrawals ``` Withholdings are subject to 20% for federal income tax purposes (For indirect rollovers only) YOU HAVE 60 DAYS Lastly, only 1 rollover to an IRA per year no matter the number of accounts you have

Answer 19

15% of the amount involved within the transaction and 100% if not corrected within the taxable year. Transactions: 1. Sale/Exchange/Lease of any property between a plan and disqualified person 2. Lending of Money/extension of credit between a plan and a disqualified person 3. Furnishing of goods, services, or facilities between a plan and d person 4. Transfer to or benefit of of the income of the plan to a d person 5. act by a q person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account 6 .receipt of any consideration for own personal account by a d person who is a fiduciary from any party dealing with the plan

Answer 20

50% penalty on the amount that should have been taken. Required date is April 1st of year following the turning of age 72 or 701/2 (Pre 12/31/19). If still working and not 5% owner, can wait until year after retirement (only for employer plans not IRA) Formula is plan balance from end of prior year/life expectancy factor For inherited: Same 50% penalty and will be based on eligible bene for special rules: 1. Spouse (they are the only ones that can roll this into their IRA, plus they can delay at distribution until the deceased spouse hits the age of 72) 2. Child under 18 ( when they hit 18, must be 10 years) 3. Disabled or chronically ill 4. Someone not more than 10 years younger than deceased owner Those noted above can generally use their LE in year following death and reduce by 1 EVERYONE ELSE - Limited to 10 years for distribution/No RMD requirement

Answer 21

Child 1. Support 2. Age 3. Adobe 4. Relationship Relative 1. Relationship 2. Gross income 3. Support 4. Not a qualifying child

Answer 22

Self employed is only when your net earnings exceed $400 for the year W-2 you would not need to file unless your income exceeds the standard deduction for that year

Answer 23

A taxpayer can take the standard deduction for regular tax purposes but when doing the calc for AMT you technically itemize. Everything gets added back in even with the standard taken

Answer 24

1. 100% of last year's tax liability 2. 90% of the current year liability IF AGI is over 150,000 MUST use 110% for previous year

Answer 25

The 401(k) plan avoids ADP testing because it is a QACA. Therefore, the ADP for the NHCE is irrelevant. However, the max that can be contributed is limited by IRC 415(c). The non-elective contribution on a QACA is 3% as a standard part of the plan. The employer is contributing $40,000 to the profit sharing plan, plus $6,000 as a non-elective contribution (3% of $200,000). Since the 2021 limit is $58,000, Chad can only contribute $12,000.

Answer 26

If stock is sold within 60 days after receiving the dividends the tax payer must recognize OI

Answer 27

The greater of 5,000 or 50% of the fee charged to prepare the statement

Answer 28

1. Financial Needs 2. Existing coverage 3. Current Levels of income Note Health insurance would not be needed for this comparison

Answer 29

It's similiar to a HMO, PPO, or POS plan. It will cover vision dental, and hearing. Rememeber these are not covered in part A or B

Answer 30

1. Discount Rate - The rate at which banks borrow from the fed 2. Buying/Selling open market securities - Buying from banks 3. Reserve Requirement - How much money banks must keep in their reserves (Can't lend) 4. Excess Money Supply - How much money banks must keep in excess -

Answer 31

1. Taxation 2. Gov Spending 3. Debt Management

Answer 32

1. Student Loans 2. Alimony 3. Taxes owned within last 3 years ``` Protected Rollover IRA IRA/Roth exempt 1.3M Alimony/Child Support Pensions/life insurance/annuities ```

Answer 33

1. Current Assets/Monthly non dis expenses 2. PITI/Monthly Gross Income 3. PITI+ Non discretionary expense/Monthly gross income 4. ER/EE contributions/gross income

Answer 34

Fed Pell Grant - Need Stafford - Subsidized = Need / Unsubsidized is not PLUS - Based on parents credit score

Answer 35

AOTC - 100% first 2K, 25% on the next 2,000 (max = 2,500) Lifetime = 20% up to 10,000 (Max = 2,000) Can't claim both of these on same child. Can only have the lifetime on 1 return. AOTC can be claimed on multi children Education Reimbursement = 5,250 limit excluded from gross income NOTE: FASFA is based on 2 year tax data. So if you apply in 2021 school year they will look at 2019 taxes for credit

Answer 36

``` Cash Reduce future premiums Accumulate at interest Purchase of paid up permanent additions One year term ```

Answer 37

1. Take in cash 2. Use as a single premium to purchase paid up life insurance 3. Use to buy extended term (can provide the same amount of coverage but stops payment of premiums)

Answer 38

1. Transfer to the insured 2. Transfer to business partner of the insured 3. Transfer to partnership of insured 4. Transfer to corporation of insured 5. Transfer that results in carryover basis from transferor to transferee

Answer 39

``` FIFO= pre 1982 LIFO = post 1982 ```

Answer 40

1. Company that has less than 20 EEs don't need to provide it. Remember part time EEs count as half 2. ER can charge 102% for the premium 3. Term: Anything related to termination/Change of employment = 18 months (Misconduct not covered) Disability = 29 months Everything else = 36 months (Watch for when you go on Medicare bc spouse will only be covered for 3 years) 4. 60 day filing requirement

Answer 41

1. Earthquake/Landslide 2. Law 3. Flood 4. Nuclear/War 5. Power Failure 6. Intentional Act (Burn your home) 7. Neglect

Answer 42

D - Dwelling O - Other Structures P - Personal Property L - Loss of use E - Personal Liability F - Medical Payments to others (help I have fallen and cant get up)

Answer 43

1. Used to cover nursing home/other types of care outside health insurance 2. To be eligible for benefits, must be unable to perform 2/6 ADLs for 90 days 3. Premiums are tax deductible subject to 7.5% floor

Answer 44

``` Bathing Eating Dressing Transfer from Bed to chair Continence Using the toilet! ```

Answer 45

0-60 days = 1,484 deductible per benefit period Ends when out for 60 days 61-90 days - 371 per day 91-150 days - 742 per day (gone when used) Skilled Nursing - first 20 days 100% covered but 21 - 100 = 185.5 per day

Answer 46

80% of approved charges ``` DOES NOT COVER: Dental Cosmetic Hearing Aids Eye exams Initial preventive/annual wellness visit ```

Answer 47

For a surrender value, he will get the amount stated. So, he will get 40,000 for surrendering the policy. But what is his basis? Well 30K based on the premiums. But remember that dividends are a return of basis so we need to deduct that amount. 40K-25K = 15K taxed at OI

Answer 48

Any amount of cash that is removed from the policy is reflected in a decrease in the amount of dividends and interest paid on that policy. With a “direct recognition” policy, when you borrow money from your policy the insurance company first subtracts the amount of the loan from the cash value, then calculates the dividend on the lesser amount. For example. If you have $100,000 cash value and borrow $10,000, your dividend will be based on the $90,000 cash value amount.

Answer 49

Dave is paying $115.20 each year for the coverage Dave's calculation: 120,000 / 1,000 = 120 units of coverage x .08 per unit of coverage = 9.6 x 12 months = $115.20 The Table I cost is calculated by subtracting $50,000 (the tax-free amount allowed under Section 79) from the $120,000 actually purchased, dividing the remainder by $1,000, multiplying the Table 1 rate of 0.15 times 12. $120,000 - $50,000 = 70,000 / $1,000 = 70 units of coverage × 0.15 (Table 1 rate) = 10.50 × 12 months = $126 taxable to Dave. So, the Table 1 premium is $126. Subtract the $115.20 already paid by Dave from the $126 Table 1 premium to determine the additional taxable income: $126 - $115.20 = $10.80

Answer 50

It's similar to a HMO, PPO, or POS plan. It will cover vision dental, and hearing. Remember these are not covered in part A or B

Answer 51

- Used to be under age 17...2,000 per person - Partially refundable - Must be a qualifying child NEW CREDIT Dec 31 2020-Jan 1 2022 - Child UNDER 18 at the end of the tax year will get a fully refundable credit of $3K - IF child UNDER 6, you get $3,600 Does include phaseouts. So MJJ is 150K so either going to be way above or below

Answer 52

Working tax payer! So both husband and wife must be working to claim. $500 nonrefundable credit will be allowed for qualifying dependents - Quailing relatives/children who can't claim child tax - SS not required for this credit

Answer 53

Credit of 50% of the expenses paid for the following: - Dependent under age 13 - Spouse or dependent with a handicap Expenses are limited to: - LESSER of actual costs of 8K for one person - 16K for 2 or more qualified individuals OR - Earned income of the lower earning spouse DOES NOT COVER OVERNIGHT COTS/ NO PHASE OUT

Answer 54

The parent will always be 0! - the child is taxed at the parents rate but the tax is going on the kids return not the parents! Remember UNDER age 19 and UNDER age 24 if full time student For setting it up, UI on the left/EI on the right. For the UI make sure deduct the amount taken from your SD. That will produce the tax at Parent Rate ``` For the middle: Gross Income -STD Deduction (Greater of 1,100 or EI+350) = Taxable Income - Parent Rate Tax from UI column = Amount taxable to the child ```

Answer 55

P = Pain so will always be an add back! 1. Percentage depletion 2. Intangible drilling costs 3. Interest on private activity bonds

Answer 56

Can be a deductions/Addition. KNOW THESE 4 ITEMS: 1. Accelerated depreciation for real/personal property 2. Standard deduction if itemized deductions are not used 3. Taxes (State, Local, Property) - Strategy would be to punt property taxes payment to next yr 4. ISO bargain element (Positive at exercise/Negative at Sale)

Answer 57

At Risk Rules 1976 Passive loss rule 1986 Created: Active Portfolio Passive Passive income can only be deducted based on your gain in passive activity. Otherwise, it's carried forward as a suspend loss. Also, only entitled to the amount you have at risk. This is the first funnel. Note: it must be a passive activity, so if a client has 25K in royalties that means nothing bc that's portfolio income

Answer 58

Immediate depreciation (Great for small business owners) Two Numbers to know: 1,050,000 2,620,000 Costs can't exceed the 2.62M. IF so, that 1,050,000 deprecation is reduced $ for $ for the amount over. Losses can only be carried over by the costs of equipment limited by Net Income. So if they have 600K of equipment but NI is 400K, they can carry the 200K forward. Recapture Rules only apply when: 1. The Business use of the asset drops by 50% in 1 year 2. When the asset is sold before fully depreciated

Answer 59

- Sale/Exchange of a property - Deductions for Rent/Royalty - 50% of self employment tax - 100% of health insurance premiums paid by self employed Contributions to pension/profit share/annuity/IRA Penalty on premature withdrawal on CD Int on Student Loans (2,500 cap) subject to phaseout

Answer 60

The sale of the ISO shares is a disqualifying disposition because the 2 year and 1 year requirements were not met. This disposition results in ordinary income for George in the year of the disposition. The employer also receives a deduction for the same amount. The compensation equals the difference between the value on the date of exercise and the strike price. The remaining gain is treated as a capital gain. There is also a negative AMT adjustment in the year of the disqualifying disposition – in this case it equals $100,000 (# of shares times the difference between the exercise price and the FMV on the date of exercise). The (short term) Capital gain would be $50,000 OI would be 100,000 and AMT Adjustment of 100,000 Year 1 – Jan 1 – grant $5. (10,000 shares) Year 2 – Oct 30 – exercise $15. AMT adjustment of $10 ($100,000) Year 3 – Aug 13 – Sold $20. Negative AMT Adjustment $10, and taxed at Ordinary Income rates. Sold 10,000 at $20 = 200,000. Two years from grant? Yes. 1 Year from exercise? No = disqualifying disposition. Basis at $5 = 50,000 Gain of $150,000 of which $100,000 is taxed at OI, and the remaining $50,000 is STCG.

Answer 61

The FMV of the asset on the date of death will be used to determine how much will be included in gross income. Because it's a promise set within the will to be compensated for a task with an inheritance the IRS views this as income and not an inheritance

Answer 62

The CFP® professional will first have to calculate the present value of the payments that will be made each year to determine the maximum loan amount. First find the max monthly payment she can make, $8,400 / 12 = $700. The keystrokes will be as follows: 48, n 6/12, =, i 700, +/-, PMT 0, FV Then calculate the PV which is $29,806. This amount is subtracted from the purchase price of $44,200, so the down payment will be $44,200 - $29,806 = $14,394.

Answer 63

So the max the policy will pay is 300K. Doesn't matter on the number of people. The property damage has a max of 25,000 so that is separate from the bodily injury of 300K Lastly, we have the court cots of 18,000 so the total will be 343,000

Answer 64

We know that when int rates rise, bond prices will go down. So we wouldn't want to invest in long term bonds bc those will be more volatile to the price changes. Short term bonds will be able to maintain their price, therefore being a better investment for the investor Note: Preferred and utility stocks will move in the opposite direction

Answer 65

First, we calculate the future value of the interest payments from the bond. The payments are $30 every six months and can be invested at 5%. The keystrokes are as follows: 14, n 2.5, i 0, PV 30, PMT Then we calculate the future value FV which is 495.57. Next, we calculate the rate of return for the bond: 14, n 950, (+/-), PV 0, PMT 1,495.57, FV (Par value of the bond plus the FV solved for in step 1) Then we calculate the investment return, i, which is 3.29% for the semiannual rate, and we need to double it for the annual rate of 6.58%.

Answer 66

The Federal Reserve sets the initial margin requirement, and it is currently at 50%. The investor will deposit 50% of the purchase price or $11,250 and borrow an equal amount. If the price of the stock falls to $43 per share, then the equity will be only the following amount: ($43 × 300 shares) – $11,250 = $1,650. The amount of equity required is $43 × 300 × .25 = $3,225. The amount the client must deposit is $3,225 – $1,650 = $1,575.

Answer 67

At this time, they have 113 months left to go on the loan. ``` The calc: n=? I=8.5/12 PV= -62,000 PMT= 9,600/12 FV = 0 ```

Answer 68

147,000 (gift tax paid)

Answer 69

All income from the property must be included for the year. You will have a deduction but that will be limited to the allocated portion of the rent vs personal

Answer 70

We calculate the amount that Sam will pay over the four years as a present value calculation: N=4 × 12, i=6/12, PMT = -7400/12, FV=0, then PV. The result is $26,257.86. We subtract that amount from the purchase price of $38,500, and the answer is $12,242.14.

Answer 71

An inverted yield curve predicts an impending recession usually in the next 6 to 24 months. The stock market is likely near a peak and will start to turn down. An investor will want to sell stocks and long-term bonds and buy short-term bonds and money market securities. As inflation and interest rates peak, the investor will want to buy long-term bonds and preferred stock. After the economy has reached the trough, the investor will want to buy short-term bonds and common stock. When the economy is in the expansion phase, the investor will buy real estate and gold.

Answer 72

PLUS loans are made to parents of students enrolled in higher education, so the client will be able to take interest deductions for the interest paid on Plus loans next year. The Perkins loans are no longer available after 2017. The contributions to Coverdell ESAs and Section 529 plans are not deductible on the federal income tax return. The interest on Series EE bonds is excluded when used for qualified education expenses, it is not deductible.

Answer 73

The client requires an investment with a required return of 8.5%. The current yield from the funds is calculated by dividing the dividend by the share price. Fund I has a return of 8.9%; Fund II has a return of 8.1%; and Fund III has a return of 7.4%. Thus, only Fund I will meet his requirements.

Answer 74

The Sharpe ratio is calculated using the formula on the formula sheet: S = rp − rf where rp is the average return for the portfolio, and rf is the average risk free rate. σp where σp is the standard deviation of the portfolio returns. The average returns and the standard deviation for the returns can be calculated by entering the returns and pressing the sigma plus [ ∑+ ] key after each return. Then the keys for average and sample standard deviation are pressed. For the HP 10bII the keystrokes are - 9. 0, ∑+ , 8. 5, +/- , ∑+ , 12, +/- , ∑+ , 2.5, ∑+ , 16, ∑+ , then Gold Shift, 7 (for the average of 1.4), and Gold Shift, 8 (for the standard deviation of 11.72). The average risk free rate is 3 + 3+ 2+ 1 +1 divided by 5 which is 2. Since the average of the returns for the portfolio is 1.4, the average risk free rate is 2, and the standard deviation of the portfolio returns is 11.72, the Sharpe ratio is: S = (1.4 – 2)/ 11.72 = -0.05

Answer 75

ONLY 1. So if they have common, preferred cant be used.

Answer 76

By adding a trustee to a cross-purchase agreement, the number of life insurance policies can be reduced because the trustee can buy one policy on each owner. The transfer-for-value problem with a corporation can be avoided because there is no need to transfer policies among the owners. Through the trustee, the surviving owners are treated as having received the death benefit and purchased the shares of the deceased owner. The owners do not need to buy life insurance policies from the estate. The same equity of results is achieved whether a trustee is used with the cross-purchase agreement or not. The problem of uninsurable owners cannot be resolved by means of a trustee.

Answer 77

It's the net earnings/the capitalization rate. Remember the net will be calculated by deducting our expenses.

Answer 78

Short-term rates are lower because of the lower risk associated with them. The longer an investment ties up an investor's capital, the higher the rate must be to offset this risk. Inflation expectations may be lower in the future, resulting in a downward (inverted) sloping yield curve. Higher inflationary expectation is a driving force for an inverted yield curve as the Fed raised short term rates faster than the long term rates adjust to the higher risk. The "natural" position is an upward slope, which indicates a more "normal" environment.

Answer 79

IRR = 9.53 CF DOB

Answer 80

``` Names: Family Trust Bypass Trust Credit Shelter Trust Residual trust ``` Use: It's used to use the exemption of the spouse without going into the estate of the wife when she passes. It can be set up so that she receives income but the main goal is to lower the estate value for the couple when both are gone. While portability accomplishes a similar thing, it's main goal is for the highly appreciating assets. Portability will allow the assets to enter the wife estate but the B trust will bypass her estate leaving no estate tax for assets that could be worth over $200M

Answer 81

Name: Martial Trust General power of appointment trust Use: When the B trust is fully funded with the exception amount the remainder will go to the A trust. From here we have the ability to use the martial deduction because the wife has the general power of appointment including these assets within the estate

Answer 82

Name: QTIP (qualified terminal interest trust) Use: Mainly for kids in a different marriage/if the husband wants to control what happens to the assets after he dies. With the A trust, the wife has GPOA so she can control where everything goes. But with the C trust, the wife will receive income payments (allowing the use of the martial deduction due to the terminal interest). At her death, the value will go to the kids. The goal of these trusts are to keep the husbands estate tax at 0 when he passes away

Answer 83

Net income + Interest + Depreciation = NOI

Answer 84

Remember dividends are part of the cash flow for the security. But we don't care what the investor purchased each year. CFo = <50>, CFj = 2, CFj = 64 (62 + 2) then solve for IRR. Remember, time-weighted return is only concerned about the security's cash flow, not the investors. The question is asking about time weighted return. TWR is looking at the performance from start to end, not the investors performance. In this case it is looking at one share from start to end. Two years of dividends are accounted for. The second purchase is the investors return, which would be dollar weighted return.

Answer 85

The lower the coupon the more volatile the bond The longer the maturity the more volatile The lower the quality the more volatile The longer the duration the more volatile

Answer 86

-D (New int rate - old/old) = % change in price. Use the calc to add that % change to the bond and thats our answer.

Answer 87

If you are long the commodity, that means you own it. You don't want prices to go down If you are short, you need to! So you are concerned about prices going up So if you sell a futures contract that is because you are trying to offset your risk of owning the commodity (SELL IF YOU ARE LONG) /if you buy it, that because you need the good and don't want prices to go up(BUY if you are SHORT).

Answer 88

Strategic asset allocation is concerned with allocating the wealth of a client among various asset classes, consistent with the clients' investment objectives, time horizons and risk preferences. Tactical asset allocation is concerned with shifting wealth between asset classes to take advantage of expected price level changes (timing) arising from broad movements in the business cycle

Answer 89

The basis will be the taxpayer's adjusted basis on that property as of the date of conversion or the FMV if lower

Answer 90

COV= correlation of the two assets*std dev 1*std dev 2 It is a measure of how MUCH two assets move together. It combines the volatility of one stocks return with the tendency of those returns to move up or down at the same time that another stocks returns move up or down It is used to show your risk reduction. It is a relative measure. If two assets have a negative covariance, the more likely they aren't going to move in the same direction = diversification

Answer 91

Beta is a measure of an assets market risk, bc it's the risk that you can't diversify away from. Formula = COV(remember that is correlation *std1*std2)/variance (legit just std dev squared)

Final Points Flashcards

(117 cards)