Investment planning Flashcards
(24 cards)
Interest rate differential formula
((your rate - current rate) x mortgage o/s balance) x (remaining mths / 12)
CSB needs to held onto for how long before it pays out interest?
90 days
T-bill price formula
price = [face value (par value) / (1+ {yield x (# of days to mat/365)})]
mortgage backed securities features
- the value fluctuates inversely with interest rates
- potential capital gains when sold
- interest fully taxable
- ACB is original cost - any accrued interest - principal repayment received
ex dividend date is
2 days before record day
dividend record day
is the day that dividends will be paid to shareholders
calculate rate of return on margin
capital gain amount divided by amount you invested not including what was borrowed
participating preferred share
rates to a pre-determined share of a company’s net profits over and above amount the specified dividend rate
quick ratio formula
(current assets - inventories) / current liabilities
debt equity ratio
total liabilities / total shareholder’s equity
interest rate coverage ratio
(IBIT) income before interest and taxes / total interest expense
net profit margin formula
net profit / net sales
return on asset formula
net income / total assets
Income trusts
are commercial trusts that invest in one or more operating companies and are designed to distribute cash flow to their investors
Taxable capital gain
is half of capital gains calculated
After tax inflation adjusted return formula
[(nominal return - (1- MTR)) - Inflation] / [1 + Inflation]
callable bonds
gives the issuer the right to redeem the bonds after a specific amount of time
puttable bonds
gives the issue the right to redeem the bonds at par value
Right
opportunity to buy additional shares to maintain proportional ownership, small time window to do it. Exercise price is below mkt price
warrant
allows share holders to buy a specific number of shares for a specific price over a longer period of time. . price is usually higher than market price
Strategic asset allocation
benchmark asset mix designed to achieve the client’s long term goals and objectives
Tactical asset allocation
taking advantage of perceived opportunities in short term fluctuations
For a Fixed income with same coupon rate and yield, what happens when a change in yield occurs?
results in a greater price change for those with longer durations
For bonds with the same maturity and yield, what happens when a change in yield occurs?
results in a greater change in price for lower coupon bonds
