investments

One year ago, you purchased 400 shares of Southern Cotton at $36.20 a share. During the past year, you received a total of $250 in dividends. Today, you sold your shares for $38.50 a share. What is your total return on this investment? 7.60% 8.08% 9.69% 12.68% 11.64%

8.08% [$38.50 − $36.20 + ($250 / 400)] / $36.20 = .808, or 8.08%

Turnover =

= $(the < of fund's total purchases or sales during yr) / $avg daily assets

Equity securities include

CS and PS

Percentage Return =

Div yield + CGY

ST funds are..

MMMF's ; MMMFs maintain a $1 NAV to resemble bank accounts

"breaking the buck" refers to

a NAV for a MMMF that is < $1

The turnover for a mutual fund refers to:

a measure of trading activity

a primary asset is..

a security that was originally sold by business/gov't to raise money

closed-end funds refer to

an investment company that issues a fixed number of shares which can only be resold in the open stock market

options contracts..

are agreements that gives the owner the right, but not the obligation, to buy/sell a specific asset at a set price for a period of time

MMDAs differ from MMMFs in that they

are bank deposits w/FDIC protection

back-end loads..

are charged levied on redemption

front-end loads..

are charges levied on purchases

Shares in open-end funds

are worth their NAV b/c shares are ready to redeem at any time

Street name registration refers to

arrangement under which a broker is the registered owner of a sec, the account holder is the "beneficial owner"

Target Date Funds refer to...

asset allocation chosen is based on the anticipated retirement date of the holding investor

To be considered liquid, a security must: be held in a cash account. pay dividends. be able to be purchased on short notice. be held for less than one year. be able to be sold quickly with little, if any, price concession.

be able to be sold quickly with little, if any, price concession

If you want the right, but not the obligation, to buy a stock at a specified price you should: buy a call. sell a call. buy a put. sell a put. either sell a call or buy a put.

buy a call

An American call option grants the holder the right to: sell the underlying security at the strike price on or before the expiration date. sell the underlying asset at the strike price only on the expiration date. buy the underlying asset at or below the exercise price on or before the expiration date. buy the underlying asset at the exercise price only on the expiration date. buy the underlying security at a stated price on or before the expiration date.

buy the underlying security at a stated price on or before the expiration date

Market timing is the: placing of an order within the last half-hour of trading for a day. period of time between the placement of a short sale and the covering of that sale. buying and selling of securities in anticipation of the overall direction of the market. staggering of either buy or sell orders to mask the total size of a large transaction. placing of trades within the last half-hour prior to the commencement of daily trading.

buying and selling of sec's in anticipation of overall direction of the market

Which one of the following represents a residual ownership interest in the issuing firm? U.S. Treasury bond corporate bond municipal bond preferred stock common stock

common stock

Sector funds..

concentrate on investing in one industry or commodity

A 12b-1 fee is a fee charged by a mutual fund:

covers marketing and distribution, usually ~.25%

Money market instruments are

debt obligations, usually to large corporations and governments w/maturity < 1 year

margin calls..

demand for more funds when the margin drops below the maintenance margin

Asset allocation is the: selection of specific securities within a particular class or industry. division of a purchase price between a cash payment and a margin loan. division of a portfolio into short and long positions. distribution of investment funds among various broad asset classes. dividing of assets into those that are hypothecated and those that are not.

distribution of investment funds among various broad asset classes

a prospectus..

document issued to possible buyers of a stocks and bonds outlining the financial condition of the company issuing those securities; MF's req'd to supply by law

"regulated investment company" ..

does not have to pay taxes on its investment income; all passed down to investors

derivative assets are..

financial asset derived from primary asset rather than issued by biz/gov to raise capital; these include futures and options

a dual-class share system allows

founders to maintain control w/o holding majority shares

Deriatives includes

futures and options

Mutual funds are generally created to..

generate fees for an advisory firm

put options..

give owner the right to SELL underlying asset

call options..

give the owner the right to BUY underlying asset

sunset provision refers to

how share classes revert back to one-share, one-vote structure after a period of time

ou will earn a profit as the owner of a call option if the price of the underlying asset: decreases. remains constant or decreases. remains constant. remains constant or increases. increases.

increases

a future contract..

is an agreement made today regarding terms of a trade that will take place at a later date

An index fund..

is one that tracks the S&P 500

A mutual fund is owned by

it's shareholders; it's a corporation

fixed-income securities are

longer-term debt obligations that promise to make fixed pmts according to a preset schedule w/maturity > 1 year

The minimum equity that must be maintained at all times in a margin account is called the

maintenance margin

Share values of closed-end funds..

may differ from their NAV

Interest-bearing securities include

money market instruments and fixed-income securities

An investor who follows a fully active strategy will: move money between asset classes as well as try to select the best performers in each class. move money between asset classes but will not be concerned about which individual securities are owned. focus on picking individual stocks only. maintain a relatively constant mix of asset classes while continually buying and selling individual securities. concentrate solely on asset allocation to maximize potential returns.

move money between asset classes as well as try to select the best performers in each class

The value of a load mutual fund's assets less its liabilities, divided by the number of shares outstanding is referred to as the fund's

net asset value

MMMF's are

open-end funds which invests solely in ST debt obligations

The price paid to purchase an option contract is called the: strike price. option premium. exercise price. future premium. current yield.

option premium

A contract that grants its buyer the right, but not the obligation, to sell an asset at a specified price is called a: futures contract. call option. preset contract. put option. primary contract.

put option

hypothecation..

putting securities up as collateral against a loan

The rate of return earned on a U.S. Treasury bill is frequently used as a proxy for the: a. market rate of return. b. risk premium. c. deflated rate of return. d. expected rate of return. e. risk-free rate

risk-free rate

The risk premium is defined as the rate of return on: a. a risky asset minus the risk-free rate. b. a risky asset minus the inflation rate. c. the overall market. d. a U.S. Treasury bill. e. a riskless investment.

risky asset minus risk-free rate

Margin accounts..

sec's can be bought or sold on credit

Cash accounts..

securities can be purchased to the extent there's sufficient cash available in the account

Jack is researching chemical companies to determine which company's stock he should purchase. This process is known as: market timing. purchase shorting. marketing research. asset allocation. security selection.

security selection

Which one of the following had the highest average return for the period 1926-2018? a. large-co stocks b. small-co stocks c. long-term corp bonds d. long-term gov bonds

small-co stocks

Which one of the following had the highest risk premium for the period 1926-2018? a, intermediate-term government bonds b. long-term government bonds c. U.S. Treasury bills d. large-company stocks e. small-company stocks

small-co stocks

the current yield on a bond refers

the annual coupon / current bond price

the coupon rate refers to

the interest rate paid on the bond (usually never changes)

the coupon of a bond refers to

the payments made to the holder

the margin refers to

the portion % of the value of an investment that's NOT borrowed

Todd purchased 600 shares of stock at a price of $68.20 a share and received a dividend of $1.42 per share. After six months, he resold the stock for $71.30 a share. What was his total dollar return? $3,211 $2,712 $1,860 $1,008 $3,400

$2,712 600 × ($71.30 − $68.20 + $1.42) = $2,712

Christine owns a stock that dropped in price from $43.57 per share to $39.49 per share over the past year. The dividend yield on that stock is 1.6 percent. What is her total return on this investment for the year? −10.49% −7.76% −8.04% −9.11% −11.31%

-7.76% % Return = dividend yield + cap gains yield [($39.49 − $43.57) / $43.57] +.016= −.0776, or −7.76%

One year ago, you purchased 500 shares of stock at a cost of $10,500. The stock paid an annual dividend of $1.10 per share. Today, you sold those shares for $23.90 each. What is the capital gains yield on this investment? 9.96% 14.75% 13.81% 12.49% 10.52%

13.85% CGY = (P,eb - P,bb) / P,bb [($23.90 × 500) − $10,500)] / $10,500 = .1381, or 13.81 percent

Net Asset Value =

= $value of MF's assets / #shares OS

1 + EAR =

= (1 + holding period % return)^m where m = 12 mo./mo held

Capital gain (loss) =

= (EP - BP) x #shares

capital gains yield =

= (P,eb - P,bb) / P,bb

Dividen yield =

= Div pd for yr. / beg stock price

Total dollar return eqn

= div income + cap gain(loss)

Dividend income equation

= divs/share x #shares

Kay just purchased $5,000 worth of stock. She paid $3,000 in cash and borrowed $2,000. In this example, the term margin refers to: the total amount of the purchase. the percentage of the purchase that was paid in cash. the percentage of the purchase paid with borrowed funds. any future increase in the value of the stock. any future decrease in the value of the stock.

the percentage of the purchase that was paid in cash

option premiums are..

the price paid to purchase option contract

strike price refers to

the specified price at which the underlying asset can be bought/sold

The standard deviation is a measure of: capital gains. changes in dividend yields. changes in the capital gains rate. volatility. total return.

volatility

Capital gains are included in the return on an investment: whether or not the investment is sold. when either the investment is sold or the investment has been owned for at least one year. whenever dividends are paid. only if the investment incurs a loss in value or is sold. only if the investment is sold and the capital gain is realized.

whether or not the investment is sold