Investment Planning Flashcards
(179 cards)
1
Q
How are exercised stock options treated for taxes?
A
Taxable benefit is realized when the options are exercised, because you are getting the shares at a price lower than market price. The taxable benefit is the difference between the exercise price you get the shares at versus the market price at the time you exercise the shares. YOUR ACB THEN BECOMES THE MARKET PRICE OF THE SHARES WHEN YOU EXERCISED THEM, NOT the exercise price.
2
Q
When do you start re-paying the homebuyers HBP amount you withdrew?
A
In the 2nd calendar year after the initial withdrawal. (for purchases between 2022-2025 you start on 5th year).
3
Q
Can you make HBP repayments in the first 60 days of the following calendar year like you can with RRSP CNs?
A
yes
4
Q
How long do you pay HBP back for
A
15 years
5
Q
What are the assumptions under Modern Portfolio Theory?
A
Market conditions are considered perfect, such that, investors expect similar returns, have similar time horizons and can borrow at the same risk-free rate
6
Q
What is Modern Portfolio Theory
A
A mathematical framework for assembling a portfolio of assets such that the expected return is maximized for a given level of risk.
7
Q
What is an index-linked GIC
A
interest is linked to performance of underlying index and paid at maturity. MUST hold it to maturity to get the interest.
8
Q
What is one risk that is unique to emerging markets investing versus developed markets investing
A
Liquidity risk because EM often don’t have liquid markets so there is a risk you can’t sell your shares at market value
9
Q
what are SRAs
A
securities regulatory authorities.Tasked in their province for securities regulation, overseeing securities markets, ensuring protection of investors.
Review and approve prospectuses, market surveillance, enforcing action against violators of securities law
Ensure public companies file accurate financial information.
10
Q
what are the 4 purposes of SRAs
A
Investor protection
Fair access to markets
reduction of systemic risk
regulation of marketplaces within their jurisdiction
11
Q
What is CSAs mandate
A
to harmonize and improve regulation of capital markets.
12
Q
what are the steps to resolve a dispute in the securities industry
A
- file complaint with advisor/firm/dealer
- File complaint with Ombudsman for banking.investments (OBSI)
- file complaint with SRO like IIROC or MFDA
- File a complaint with a securities regulatory administrator (SRA)
- Take legal action like going to court. Usually a last resort
13
Q
What is the market equilibrium
A
the price of a product where buyers and sellers are balanced, enabling anyone who wants to buy or sell the product to do so
14
Q
Income approach GDP
A
adds up all income generated by economic activity (spending on goods and services)
15
Q
Expenditure approach to GDP
A
adds up all consumer, business, gov’t spending during a certain period including business investments, exports, imports
GDP= Consumers + Business spending and investment + Government spending + (exports-imports)
16
Q
5 phases of business cycle
A
Expansion, Peak, Contraction, Trough, Recovery
17
Q
Characteristics of Expansion phase (business cycle)
A
stable inflation
Companies invest in new capacity to meet rising demand and avoid shortages
corp profits increase
more start ups than bankruptcies
strong stock markets
strong job creation,
steady or declining unemployment
18
Q
Characteristics of Peak phase (market cycle)
A
marks the conclusion of expasion phase and start of contraction phase.
Demand exceeds economy’s capacity to supply it
labour and product scarcity leads to price and wage increases = inflation
interest rates rise to tame inflation, so bond prices fall and business investment shrinks
Sales of businesses decline resulting in build up of undesired inventory and reduced profits
stock prices start to from along with declining profits, stock market activity rises
19
Q
Contraction phase characteristics (business cycle)
A
reduction in economic activity and maybe negative GDP (recession)
firms cut back on production, delay investment, decrease hiring/lay people off
business failures outpace start ups
decrease in employment erodes household income and consumer confidence
people spend less and save more
minimal activity in the stock market
20
Q
Trough phase of the business cycle
A
falling demand and excess capacity impede firm’s and workers’ ability to demand higher prices and wages. Growth cycle reaches a trough, its lowest point.
Interest rates decline and bond prices rally inflation decreases
consumers who postponed purchases during contraction are encouraged by lower rates and start to spend
stocks start to rally
21
Q
Recovery phase of business cycle
A
GDP recovers to peak
renewed interest in buying goods and services
firms have to increase supply to satisfy new demand
widespread layoffs come to an end
companies are not quite ready for large new investments
unemployment is still high but wage pressures are limited and inflation may continue to decrease.
**When economy surpasses its previous peak, another expansion phase has commenced
22
Q
Leading indicators
A
housing starts
Manufacturers’ new orders
commodity prices
avg hours worked
stock prices
money supply
23
Q
Coincident indicators
A
Personal Income
GDP
Industrial production
Retail sales
24
Q
Lagging Indicators
A
Unemployment
Inflation rate
labour costs
Private sector plan and equipment spending
Business loans and interest on loans
25
What is working age population
people 15+
26
who is in the labour force
employed people or those looking for work
27
labour participation rate
(labour force/working age population) X100
28
unemployment rate cacl
(people looking for work/labour force)X100
29
Underemployment
people who are working but in a job that is below their skill level. Leads to reduced productivity and lower standard of living for them
30
discouraged workers
people who have given up looking for work, retired early, returned to school. No longer included in labour force because they are not actively looking for work
31
types of unemployment
Cyclical - changes in business cycle
Seasonal
frictional - normal labour turnover
Structural - from a skills gap or mistmatch between job vacancies and potential workers.
32
Natural unemployment rate
the lowest level unemployment can reach with out causing increased inflation. Economy thought to be fully utilized at this point.
33
Deflation
year-over-year decreases in inflation (negative inflation)
34
Disinflation
decline in the rate of inflation, still positive though
35
Result of disinflation
businesses and people might delay purchases in anticipation of lower prices which leads to slower economic growth and therefore increased unemployment
36
Balance of payments
statement that records a country's transactions with rest of world during certain period. Consists of Current account and Capital & Financial Account
37
Current account
transactions relation to imports and exports including net foreign aid. AKA trade account
38
Capital Account
records financial flows between canadians and foreigners, reflecting foreign investment in Canada and vice versa
39
Fiscal policy
taxation and gov spending
40
Federal fiscal year
april 1-March 31
41
Crowding out
significant gov borrowing can lead to reduced ability for businesses to borrow and has negative impact on economy as supply does not equal demand and leads to higher interest rates and increased borrowing costs
42
How are decisions made at BoC
consensus, NOT majority
43
Responsibilities of BoC
implementing monetary policy to keep inflation low and stable, maintaining the efficient operation of the financial system, designing,
printing, and distributing Canadian banknotes (i.e., physical currency), and managing the government's accounts, foreign currency reserves, and federal debt
44
Monetary policy
goal is to preserve value of money in economy by keeping inflation low,stable and predictable.
45
Target overnight rate
is the mid point between the 50bp operation band. For instance, if the operating band is
1.5% to 2.0%, the target for the overnight rate would be 1.75%.
46
Open market Operations
used by the BoC, Special Purpose and Resale Agreement (SPRAs). Used to decrease interest rates.
Also, sale and repurchase agreements (SRAs)
Also Large Value Transfer Systems
And Drawdowns and redeposits
47
How does an SPRA work
(1) the Bank offers an overnight loan agreement to another financial institution, (2)
the Bank purchases Treasury bills from the financial institution on an overnight
basis, (3) the financial institution sells Treasury bills to the Bank on an overnight
basis to complete the lending, (4) the financial institution now has more
money to lend out, and the increased money supply results in the overnight
rate dropping, and finally (5) the next day, the financial institution pays back
the loan to the Bank, and the transaction is reversed.
48
SRAs
Sale and Repurchase Agreements - used by BoC to increase interest rates. (1) the Bank sells treasury bills to other financial
institutions on an overnight basis, (2) the Bank offers to borrow money to
complete the deal, and finally (3) the financial institution buys Treasury bills
from the Bank to complete the transaction.
49
Large Value Transfer system
used by BoC - a electronic wire system that lets institutions conduct large transactions with each other and track their payments through out the day. it ensures that trading in the overnight market stays within the Bank's
50-basis-point operating target, and participants know that the Bank will lend
and borrow money within that range
50
Drawdowns and redeposits
used by BoC
Drawdown is when BoC transfers deposits from its own bank accounts in chartered banks to its own account, reducing supply in market to increase interest rates.
Redeposit is when bank transfers funds from its account to a chartered bank to reduce interest rates
51
Open Banking
financial services concept that allows third party financial services providers to access banking data through the use of application programming interfaces. Fosters interconnected and user friendly financial ecosystem.
52
How can block chain be used
Crypto
Smart Contracts (self-executing contracts)
Supply Chain Management
Voting systems
Record Keeping
ID Verification
Financial services
Decentralized Autonomous Organizations (organizations run by code)
NFTs
53
Central Bank Digital Currencies (CBDCs)
digital forms of fiat money, a digital token but issued by a central bank.
Represent gov backed currency and equivalent in value to country's paper currency
54
Are digital currencies considered legal currency in Canada
no, but it is legal to use them to buy goods and services
55
who primarily regulates digital currencies
FINTRAC mainly.
56
how does CRA treat digital currencies for the income tax act
treats it as commodity. Gains treated as business income or capital gains and are taxed
57
roadblocks to financial planning
Lack of Knowledge
Cost
Personal Attitudes/Choices
58
Auction Market
buyers and sellers submit bids and offers to a trading platform and price is determined by highest bid. Seen as more transparent
59
What is bear market drawdown
usually 20% from recent highs
60
What is considered short term time horizon
1-3 years
61
what is considered med term time horizon
3-10 yrs
62
what is considered LT time horizon
10+yrs
63
What impacts risk tolerance
personality and experience, age, financial knowledge.
Tolerance is comfort with losses
64
what is risk capacity and what affects it
individual's ability to withstand loss.
Impacted by financial situation and goals, time horizon, dependents and financial responsibilities
65
what is risk need
risk required to achieve financial goal
66
what impacts risk tolerance and risk capacity
time horizon, investment objective, importance of investment for goal, personal attitudes, tolerance for downside volatility, net worth, amount of income, stability of income
67
how many risk tolerances does one person have
typically one. It is a personal attitude and attribute. CAN have multiple risk capacities for different goals
68
Geometric return
compound annual growth rate of an investment considering the effects of compounding
69
Arithmetic return
simple average of a series of returns over multiple periods. does not consider compounding
70
dollar weighted vs time weighted returns
dollar - accounts for timing and amount of inflows and outflows
time weighted - measures compound growth rate of investment eliminating impact of capital inflows and outflows
71
systemic risk
aka market risk. cannot be eliminated through diversification
72
non-systemic risk
specific to company or industry. Can be reduced by diversification
73
what is volatility
degree of variation in the price of an investment over a specific period of time. It is a statistical measure of the dispersion of returns, indicating how much and how quickly the value of an asset changes
74
What is CAPM
capital asset pricing model - to determine the expected risk-adjusted return of an investment.
Expected Return = Risk-Free Rate + βeta × (Market Return − Risk-Free Rate)
the market return-risk free rate is the market risk premium.
assumes markets are efficient, risks are constant over time, and investors have homogeneous expectations. In reality this is not the case.
75
What characteristics should a benchmark have
same risk as portfolio
specified in advance
objectively constructed
easily measurable
76
Difference between bond and debenture
Bond has an asset as collateral but debenture does not. Therefore interest rates are higher for debentures.
77
Ex-div date
the second business day before the record date. (probably now one day before because we moved to T+1). The day when shares start trading on the market with out a right to the dividend.
78
what is the most tax efficient source of income
capital gains
79
examples of alternative investments
hedge funds, private equity, commodities, collectibles, crypto currency.
80
Do Hedge funds have a unique legal structure?
No, can be a trust or LLP
81
Types of PE
leveraged buyout
mezzanine capital (financed by high yield unsec pref shares or subord loans)
venture capital
infrastructure
82
Insured Asset allocation
to avoid large losses and secure minimum return, as port gains value, investor adjusts exposure between risk free and riskier assets to rebalance back to a constant proportion.
83
Integrated asset allocation
considers investor risk AND economic expectations in asset mix
84
dynamic asset allocation
allocation that is continually adjusted by changing investors exposure to certain asset classes as market rise and fall in order to minimize downside risk and maximize returns.
85
mean variance optimization
maximizing return for a given level of risk
86
Different approaches to asset allocation
100-age=% in equities
lifecycle approach which is just adjusting based on life stage
87
In what accounts should REITs be held?
tax deferred or tax free accounts as they pass along most of their earnings to investors.
88
Types of rebalancing
temporal - periodic rebalancing back to target weights regardless of market conditions.
weight-based - rebalancing at certain thresholds or trigger points of over/underweight
89
most common structure for a mutual fund
open ended trust which allows fund to avoid taxation by flowing income through to unitholders.
Trust deed establishes investment objectives.
The other type of structure less common is Corporation where income the corp owns must primarily come from interest, dividends and capital gains. Corp doesn't have flow through status but can achieve tax free status by paying dividends through the year.
90
how does selling a mutual fund work
you sell the units back to the fund. This means they are in a constant state of primary distribution.
You buy it at the NAV calculated at the end of the day you bought it.
91
Mutual fund NAV per share calc
(total assets-total liabs)/#outstanding units
92
What are the three principles guiding mutual fund regulation
Personal Trust, Disclosure, and regulation
93
what is National Instrument 81-101 and 81-102
one of the few NATIONAL regulations over securities. 81-101 deals with MF prospectuses and fund fact disclosures
94
Statement of Rights
a section on a fund facts page that advises investors of their rights and options within a defined period, including the right to cancel a purchase within 48 hours after receiving confirmation
95
how are pooled funds typically structured
as a Trust and the trustee holds the funds assets on behalf of investors ensuring that the fund is manages per the offering memorandum.
They are offered through private placements, usually targeted at accredited or sophisticated investors... like the things we wanted to do for our HNW clients in private placement
96
Arbitrage using etfs?
Market participants can create or redeem ETF shares at the end of each day at their NAV, allowing for arbitrage between the ETF and its underlying securities.
o If arbitrage is difficult and costly to implement, the tracking error level will be higher than normal.
o Lack of liquidity and a large number of securities in the underlying index are two factors that could make arbitrage difficult and costly.
97
how often do passive/index ETFs in Canada and the US publish their holdings
Daily
98
standard ETFs
based on either exact replica of index or constructed reference index. Used for large cap stocks and holds stocks in same weight as index. Sampling is proves of selecting securities and their weighting to best match the performance of the index, usually used for fixed income and some international and small cap equity ETFs. Most transparent holdings of any ETF type.
99
Rules-based ETF
takes a goal oriented approach and follow an index focused on areas of the market that offer higher returns or lower risk than traditional indexes but retain the good things about ETFs like lower costs and increased transparency. For example - dividend ETF or "low volatility eft"... doesn't have to follow an index at all
100
Ranking of creditors
first mortgage and asset backed securities
secured debt
unsecured debt (debentures)
capital securities
preferred shares
common shares
101
Disadvantage of active EFT
restrictions on trading activity can cause delays in making portfolio changes.
in Canada, trades only revealed quarterly (daily in US)
Less tax efficient than passive ETFs because higher turnover of securities
102
Synthetic ETF
doesn't hold the securities in the benchmark, it uses derivatives like swaps to achieve the same return. Exposure is notional rather than real
103
rolling over futures in a contango market
Contango is a market characterized by assets being cheaper today on the spot market than at some future date using a futures contract. When the futures price of something is higher than its present spot price, investors are willing to pay more for the commodity in the future. This is illustrated by an upward-sloping forward curve.
RESULTS IN ROLL YIELD LOSS inside futures based ETF
104
which has lower tracking error, ETFs or mutual funds?
ETFs because of their index-based nature and the in-kind creation and redemption structure
105
Factor based ETFs
AKA smart Beta. Holdings/mandate based on specific traits like momentum, size, value. Carry higher risks than normal etfs.
106
What is the 'preservation of character' in ETF distributions?
unitholders are taxed on the distributions in the same way the income was received into the fund. Interest.div,cap gains
107
what impact do ETF distributions have on the NAV of the fund
mechanically decreases the NAV because the total assets of the fund decreases
108
what are the two guarantees you have in seg funds
maturity guarantee and death benefit guarantee
109
what is the minimum maturity date of seg funds
10 years and never less from the first time of the deposit (premium) is paid. Some contracts are 15 years if they offer 100% benefit guarantee
110
maturity guarantee on seg funds
75% minimum of their deposits. If the policy owner dies, the bene receives at least 75% of the initial deposit
111
What happens when a seg fund matures? (after 10 year min hold period)
either they withdraw the value of the investment, or they leave it in place and extend the contract
112
what happens if you take some funds out a seg fund before its 10yr maturity date
you get charged sales charges if there are defferred sales charges on the funds you hold. The guaranteed benefit is then reduced by the amount withdrawn
113
what happens if you surrender the whole contract of seg fund before the 10 yr maturity date
there is no guarantee. you get what is there minus sales charges
114
do seg funds require medical underwriting
no
115
what is the downside of seg funds
high fees, limited upside (need to look into this a bit more to understand)
116
what is a reset in seg funds
a date where investors can lock in the increase in value of their funds. A new maturity period (10yrs) starts on the reset date. SOmetimes only the maturity guarantee and not the death benefit, or vice versa. SOmetimes reset is automatic, sometimes up to the investor
117
what maturity dates are applied to deposits in seg fund that are contributed in series instead of lump sum
can be the maturity date (10yrs) applies to each deposit (most common) or to the date of the deposit
118
income from seg funds
either a lump sum OR one of the two following options:
1. guaranteed min withdrawal benefit (GMWB). Pays over a specific amount of time
2. Guaranteed Lifetime Withdrawal Plan (GLWP). Pays for life
Can receive withdrawals immediately and enter payout phase, or wait and continue savings phase
119
How are seg fund distributions paid and taxed
distributions are paid as reinvestments in the funds chosen. Taxed as type of income (cap gains and dividends) are reported as such by the holder even though they are reinvested.
120
do seg funds bypass probate
yes if bene is named that isn't the estate
121
who insures/protects seg fund investors
assuris
122
can creditors go after your seg funds
no. but you can't buy seg funds just so a creditor can't get them
123
can you rescind/cancel a seg fund contract
yes, usually within 2 days. investor gets the lesser of what they put in, or the vlaue of the units on the valuation date.
124
are hedge funds highly or loosely regulated
loosely
125
are prospectus required to be issued for hedge funds
no, instead you have to be accredited investor, have min investment of $150k if you are a non-individual, or through offering an offering memorandum instead
126
do hedge funds aim for absolute returns or returns based on an index
absolute
127
Biggest risk of hedge funds
business risk. Usually start up companies
Also liquidity risk, not usually liquid if you need funds quickly
128
incentive fees for hedge fund managers
fee based on performance calculated after management fees and expenses. Either high water mark (paid only on new profits) or hurdle rate (rate they must earn before manager is paid an incentive fee)
129
relative value strategies in hedge funds
exploit inefficiencies in prices of assets. Can be arbitrage, where you short the higher priced stock and buy the lower priced stock, and close out the position as the relationship converges.
130
directional hedge fund strategies
bet on anticipated movements in market prices of securities.
For Example: Hedge fund manager buys shares in General Motors (GM) worth
$1,000 and goes short shares in Ford Motor Company (Ford) worth $600. The
hedged component has equal dollar amounts ($600) of long GM shares and
short Ford shares, theoretically eliminating market risk. The unhedged
component ($400) is a directional bet on the likelihood that GM's shares will
rise. The fund's net market exposure is calculated as ($1,000 - $600) ÷ $1,000 =
40%.
131
2 types of funds of hedge funds
single strategy - buy funds with all similar strategies
multi strategies - buy funds with different strategies.
132
investment trust
closed end fund
traded on stock exchange
pooled money managed by professional fund manager
main purpose is to invest in broad range of assets.
must be registered in province they trade in
can be either a Trust of Corporation
133
impaired annuity
annuity that pays someone with a lower life expectancy, usually offering higher payments
134
term certain annuities
provides payments for a specific period regardless of how long annuitant lives.
135
who can sell annuities
only insurance companies can sell term-certain and life annuities. This is because the payments are based on actuarial calculations They can manage risk by pooling investments from many policyholders
136
can the plan owner and annuitant of an annuity be different people
in registered accounts, like converting RRSP to annuity, no. For nonreg annuities is is more flexible and can be different people. Annuitant is person whose life expectancy is used to determine amount and duration of payment.
137
higher interest rates impact on annuity
at time of contract, if interest rates are higher you will get higher payments because insurance company can earn more on its investments
138
impact of annuitant's age on annuity payments
older gets higher payments because expected to die sooner
139
taxation of annuity payments from registered accounts
income in year received as contributions typically made with pre tax dollars and grow tax deferred
140
what happens to registered acc annuity on death of annuitant
like a rrif, remaining value of annuity is income of deceased. might be able to roll to spouse or dependent children
141
tax treatment of annuity payments in non reg acc
part of each pmt is ROC, not taxed. Part is income, which is taxed. Taxable portion is determined by a ratio which calculates how much of each payment is a ROC
142
what happens on death of annuitant for non-reg annuity
remaining value of annuity or death benefit is usually included in income of deceased in the year of death
143
Prescribed annuities
taxable income portion of payment is spread evenly over the life of the annuity resulting in lower taxable portion in initial years versus non-prescribed annuities
must be a life or term certain annuity
must have regular and consistent payments
must not be indexed payments (variable)
Payments must begin in year of annuity purchase so that it is used for income as it is supposed to be used
no cash or surrender value so the annuitant cannot cash in annuity for lump sum
144
Labour Sponsored venture capital Corporation
financial org that combines features of venture capital and labour union. Sponsored by labour unions and raises capital from individual investors to invest in small and medium sized businesses. LSVC usually have tax benefits making them attractive to investors.
High risk, long term and low liquidity.
Primary purpose is to support economic growth and job creation by funding businesses. Usually early stage companies.
Someone involved in the promotion/sale/distribution should be securities licensed
LSVC must be approved in province it operates in
145
parties in a limited partnership
at least one general partner (manage day to day ops, FULLY liable for debts and obligations of partnership including personal assets)
and at least one limited partner (invest capital but do not manage ops. Liability is limited to amount they invested)
146
tax benefit of limited partnership
usually income/deductions/gains are passed to partners to claim on their individual tax returns, avoiding double taxation
147
level of dividends on value and growth stocks
value - usually higher dividends.
Growth - usually lower
148
PE ratios on value vs growth stocks
value - looking for low PE ratios
Growth - usually higher PE ratios
149
passive investment strategies
buy and hold
indexing
150
common active fixed income strategies
duration matching (aka immunization) used to manage interest rate risk by aligning duration of bond port to the investor's time horizon or cash flow needs. Good for pension funds, insurance companies, individuals with cash flow needs
Credit selection is buying bonds based on creditworthiness of issuers to generate higher returns. Finding undervalued bonds.
151
what are non-managed accounts
provide access to full-service brokerage but with out ongoing portfolio managements. Fees typically lower than managed accounts but higher than self directed accounts. Investor retains financial decision making but can access professional advice.
152
Value averaging as an investment strategy
investor changes how much they put into account to target growth path of portfolio. If port is below target value, they put in more. If it is above target, they put in less or even withdraw. requires more active management.
153
What is Sharp ratio used for
performance of investment compared to a risk free asset after adjusting for its risk. Helps understand how much excess return is being received for the extra volatility. Higher ratio means better risk-adjusted performance.
154
what does a treynor ratio tell you
the return of something per unit of market risk taken on.
155
What does the Jensen index tell you
aka Jensens alpha.
Measure average return on a portfolio or investment above what would be predicted by the CAPM given its beta and average market return. Shows if you earned a higher return than warranted by your market risk. Higher is better
portfolio's return - expected return from CAPM.
156
how do you use risk adjusted returns after you've calculated them
compare the risk adjusted return to the benchmark return and if your risk adjusted return is higher, you have performed better. If it is lower, you have underperformed. Can tell you whether higher returns are die to smart investment decisions or just a result of taking on more risk.
157
low load sales charge
this type of pooled fund charges reduces sales charge compared to front end load funds. Might decrease over time, encouraging investors to hold it for longer.
158
Is the Trading Expense ratio (TER) included in the MER?
NO
159
Requirements for REIT distributions
usually required to distribute 90% or more of their taxable income to shareholders as dividends. Allows them to avoid corp income taxes
160
tax implications of a LSVCC
investors can receive a federal tax credit typically around 15% of investment amount. It directly reduces the amount of income tax owed. Some provinces also offer credits.
If investment is not held for the required time period (usually around 8 years) they may have to repay the tax credits.
161
suitability of limited partnership investments
usually illiquid and long term. Suitable for investors seeking diversification and potentially higher returns, aligning with an aggressive investment strategy.
For more sophisticated or accredited investors.
Often come with holding periods
162
what can you use a margin loan for
not only for buying securities. can use it for other things like personal expenses, funding business opportunities or other investment needs.
163
tax deductibility of leveraged investing
interest expense can be tax deducted under certain conditions:
If loan used to earn income from business or investments;
Loan must be legally enforceable;
interest must be paid or coming payable in the year it is being claimed;
investments bought with funds are non-reg
164
can a seg fund in a reg account be used as collateral
no
165
difference between rights and warrants
A warrant may be attached to new debt or preferred issues to make the issues more attractive to buyers. A difference between rights and warrants is their lifespan. Rights usually expire within a few weeks while warrants may continue without expiring for up to several years.
166
impact of term and coupon on interest rate sensitivity of a bond
longer term and lower coupons mean more interest rate sensitive
167
bond yield calculation
Yield = {[face value - purchase price] / (purchase price) x 365 / days to maturity} x 100
168
what is the fisher equation
The fisher equation is used to calculate the real rate of return when given the inflation rate and the nominal rate of return.
169
can assets be rolled into an alter ego trust on a tax free basis
yes
170
What is an asset swap between accounts and what are the rules, taxation?
Asset transfer transactions, also known as swap transactions, are transactions where property is transferred out of an account, and cash or other property is transferred into the account. These transfers, for instance between a TFSA and another account controlled by the registered account holder, are not treated as a withdrawal and recontribution, but as a purchase and sale.
The transfers are deemed dispositions and the market price is the new ACB in the new account, so reg accounts would incur a capital gain. THESE ARE NOT ALLOWED ANY MORE
171
what is more interest rate sensitive, a bond with a higher coupon or a lower coupon
lower coupon.
172
what are the time lengths of a put and call option
only go 9 months out
173
What is a Long Term Equity Anticipation option
options that go longer than regular put call options. They can go out more than a year.
174
When determining the value of a zero coupon bond on your financial calculator, do you still have to multiply N by 2 and divide the interest rate by 2?
yes
175
What is the price of a callable bond versus the price of its call option
The price of a callable bond is equal to the price of a similar conventional bond minus the price of the call option
176
What is the formula for calculating the change in price of a bond per 1% interest rate change
-(modified duration) (change in yield) (market value of the bond)
177
What asset class are mortgage backed securities
fixed income
178
What is the main risk or downside to Principal Protected Notes
lack of transparency
179
what happens if you sell a Labour Sponsored fund before 8 years have lapsed
you have to pay all the tax credits back you originally received
