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2018 CFP > Investment Planning > Flashcards

Investment Planning Flashcards

(62 cards)

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1
Q

Eurodollars are ____ denominated deposits held in foreign banks

A

US dollar deposits in foreign banks

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2
Q

Conversion ratio for convertible bonds =

A

par value of convertible security / conversion price

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3
Q

Preemptive stockholder rights mean that you have a right to retain your ____ ownership

A

maintain your % ownership

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4
Q

The time value of an option is the _____ minus the _____

A

is the option premium (price) minus the intrinsic value

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5
Q

LEAPs are long-term equity anticipation securities and are basically puts and calls with ______

A

lengthy expiration dates

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6
Q

REMICs are real estate mortgage investment conduits and are self-_____

A

self-liquidating

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7
Q

Systematic risk is summarized as PRIME:

A 
purchasing power
reinvestment risk
interest rate risk
market risk
exchange rate risk
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8
Q

Unsystematic risks are:

A 
business risk
financial risk
default risk
political risk
investment manager risk
liquidity and marketability
tax
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9
Q

Leptokurtic means the distribution is _____ than normal

A

skinnier - taller

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10
Q

A lognormal probability distribution means that there is a ____- chance that an observation selected at random will fall to the left of the mean

A

50% chance.

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11
Q

The coefficient of determination (R^2) is calculated by squaring pij (COV) and describes the percentage variability of the dependent variable (a stock) that is explained by the changes in the independent variable (the ______

A

overall market

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12
Q

If R^2 = 1 (coefficient of determination), then there is no ______

A

unsystematic risk

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13
Q

Beta is a relative measure of _____ risk

A

systematic

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14
Q

Betas for portfolios are relatively _____ over time

A

stable

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15
Q

For normal distributions, approx ___% is within 1 STD, ___% within 2 STD, and ____% within 3 STD

A

68%, 95%, 99%

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16
Q

The z-score measures the number of STDEVs a data value is from the _____

A

mean

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17
Q

Semivariance measures the variability of _____ below the average or expected return

A

returns below the average

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18
Q

Holding period return =

A

(ending - beginning +/- cash flows) / beginning

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19
Q

The real rate of return (inflation adjusted) =

A

((1+Rn)/(1+i) -1)x 100

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20
Q

Effective annual return (EAR) =

A

[1 + (i / n)]^n -1

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21
Q

The Treynor, Sharpe, and Jensen measures are measures of ______ returns

A

risk-adjusted

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22
Q

For weak, semistrong, and strong EMH, what are the type of information reflected in price

A 
weak = technical analysis
semistrong = technical & fundamental
strong = technical, fundamental, and insider
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23
Q

The first market is where the _____ trades

A

NYSE

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24
Q

The second market is where the ____ trades

A

NASDAQ

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25
The third market is where the _____ trades
OTC
26
The Fourth market is where traders trade without the help of _____
brokers
27
The current yield =
annual interest payment / current market price
28
Are bonds with high coupons or low coupons more volatile?
low coupons
29
The unbiased expectations theory for bond yields states that long-term rates consist of many _____ and will be the ____ mean
short term rates, the geometric mean; can be used to explain a normal or inverted yield curve
30
the liquidity preference model for bond yields is the unbiased expectations theory PLUS ______
liquidity premiums
31
he market segmentation theory of bond yields relies on the concepts of _____ and _____
supply and demand
32
A simplified duration calculation is the NPV of cash flows / ______
current market price of the bond
33
Zero coupon bonds have a duration equal to their _____
maturity
34
A coupon bond will always have a duration less than its _____
time to maturity
35
Convexity (how much duration changes with change in YTM) will always be greatest for the following types of bonds:
low coupon long maturity low YTM bonds
36
The dividend discount model =
D(1+g)/ (r-g)
37
An example of a perpetuity dividend model security is a ______
preferred stock
38
The capitalized earning valuation for stocks =
Earnings (E) / discount cap rate (Rd)
39
The sales comp approach to real estate valuation is most commonly used for _______
personal residences
40
The cost approach to real estate valuation is most commonly used for ______
special use buildings (e.g. a church)
41
THe income capitalization approach to real estate valuation is most commonly used for ______
commercial real estate / income producing real estate
42
M1 is the sum of _____
demand deposits, coins, travelers checks, and currency
43
M2 is the sum of _____
M1 + savings accounts, time deposits under $100k, and balances in retail money market funds
44
The acid test or quick ratio =
(CA - INV) / CL
45
Inventory turnover ratio =
COGS / Avg INV
46
Accounts receivable turnover =
sales / Avg. AR
47
Fixed asset turnove r=
annual sales / fixed assets
48
ROA =
net income / total assets
49
ROE =
net income / equity
50
times interest earned ratio =
EBIT / annual interest expense
51
Dividend payout ratio =
dividends / net income
52
PEG ratio =
PE / expected growth rate
53
Stocks with PEGs below _____ are considered value stocks
less than 1
54
The Dow theory of technical analysis uses the ____ and ____ indices as market indicators
DJIA and the Dow Jones Transportation Average
55
Appropriate benchmarkts should be ______
``` unambiguous investable measurable appropriate reflective of current investment opinions specified in advance ```
56
The sharpe ratio should be used to compare _____
alternative investments
57
If a portfolio has no unsystematic risk, then the sharpe ratio should be the same as the _____ and ____
treynor and jensen measures
58
Why is the sharpe ratio better than the Treynor ratio?
Because stdev measures total risk and beta only measure systematic risk
59
Jensen's alpha is an _____ measure of performance, vs the treynor and sharpe which are ____ measures
absolute, treynor and sharpe are relative
60
The information ratio =
alpha / stdev ----> higher means better
61
The _____ is used as the risk free rate
TBILL
62
The coefficient of variation (NOT covariance) =
stdev/expected return

2018 CFP (10 decks)

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