Miscellaneous Flashcards
(31 cards)
Non-Cancellable “Noncan” Disability Provision
Continuous term policy guaranteeing the insured’s right to maintain the policy at a stated premium
Guaranteed Renewable Disability Income Provision
Continuous right to maintain the policy, but the insurer may increase the premium. Less expensive than noncan policy.
Taxation of Premiums and Benefits (Disability Insurance)
Individual owns contract and pays premium
- Premiums are not deductible, paid with after-tax dollars
- Benefits are tax-free to the individual
Employee owns contract, employer pays premium
- Premiums are deductible by employer as a bonus, paid with after-tax dollars
- benefits are tax-free to the employee
Employee owns the contract, employer pays the premium
- premiums are deductible by the employer, paid with pretax dollars
- Benefits are taxable to the employee
1035 Exchanges
Life to life - ok
Life to annuity - ok
Annuity to annuity - ok
Annuity to life - no way
*1035 cannot be done if insured changes!
Modified Endowment Contracts (MECs)
1) Once a MEC, always a MEC
2) All single premium policies are MECs.
If you take money out of policy, it is taxed LIFO. Traditional life insurance policy is taxed FIFO. Treated as an annuity.
Banker’s Acceptance
Instrument used to finance imports and exports
Eurodollars
A dollar denominated deposit into any foreign bank.
Yankee Bonds
A dollar denominated bond issued in the US by foreign banks and corporations
Current Yield
Annual interest in dollars / Bond’s market price
Property’s Intrinsic Value
Net Operating Income / Capitalization Rate
Intrinsic Value of a Call
Market Price - Exercise Price
Intrinsic Value of a Put
Exercise Price - Market Price
Taxable Equivalent Yield (TEY)
Tax Exempt Yield / 1 - Marginal Tax Rate
Tax-Exempt Yield
Taxable Yield * (1 - Marginal Tax Rate)
Return on Equity (ROE)
EPS / Common Equity (Net Worth of Book Value)
Dividend Payout Ratio
Common Dividends Paid / EPS
Margin Call
[(1 - Initial Margin %) / (1 - Maintenance Margin %)] * Purchase Price of Stock
Price / Earnings (P/E) Ratio
Current Market Price / Earnings
Coefficient of Variation
Standard Deviation / Average Mean
Bond Price
Coupon Amount / Current Yield
Efficient Market Hypothesis (EMH)
Advocates a passive investment strategy, like an index fund
Modern Portfolio Theory
Selecting of an optimal combination of assets such that the investor secures the highest return for a given level of risk (Active)
Protective Put
Buying a stock / owning it already, as well as buying a put for the same stock.
That is, a long position in both the stock and put. The put acts as insurance against a decline in the underlying stock.
Holding Period Return (HPR)
The total return (income plus price appreciation and dividends, less margin interest) / Price of the investment
