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
