Random #3 Flashcards
If you want to purchase a mutual fund that is outperforming the market better than any other fund what metric should you look at?
Highest positive alpha
What kind of security is most often used for international business transactions?
Banker’s Acceptance
What money market instrument does not have a secondary market?
Gov’t savings bonds.
Do I bonds have a secondary market?
No- they are not securities and can only be redeemed by the US Gov’t
Which international investment avoids currency risk?
Eurodollar bonds; they are denominated and pay in US dollars
Does nominal yield or coupon rate change over the life of a bond?
No it does not change
How is the Sharpe ratio calculated?
which securities have the longest duration?
The instrument with the lowest coupon if the maturation dates are similar
When is form ADV-E used?
To account for customers assets held in custody of RIA firm
Can an IAR have a joint account with an IA client?
No
Can an agent of a B/D have a joint account with a customer?
Yes; if approved by B/D and shares in gains or losses proportionately
Which investment trades on an exchange at a price which is unrelated to its underlying value?
closed-ended mutual fund
What is the brochure rule?
The law states that a brochure can be provided 48 hours in advance, but must be provided no later than at the time the new client signs the advisory contract.
Solve for Alpha
Step 1 in solving for Alpha is multiply the S&P return times the beta of the investor’s investment position:
5% times 1.4 = 7.0%
Subtract the Actual Return minus the answer to Step 1:
8.0% minus 7.0% = 1.0
This is referred to as the Alpha
How many types bonds are there?
3; U.S. Treasury, municipal, and corporate.
