Help
Options
Didn't know it?
click below
click below
Knew it?
click below
click below
Don't Know
Remaining cards (0)
Know
retry
shuffle
restart
0:00
Embed Code - If you would like this activity on your web page, copy the script below and paste it into your web page.
Normal Size Small Size show me how
Normal Size Small Size show me how
Test 3
Investments
| Question | Answer |
|---|---|
| Category Comparison Equation | R - Rfree = a + B * (Rm - Rfree) |
| Allocation Effect Equation | Ei = [(Wpi - Wbi) * (Rbi - Rb)] |
| GDP | GDP = C(personal consumption) + I(private investment) + G(government spending) + E(net exports) |
| Change in CPR | CPI = (new CPI / old CPI) ^12 - 1 |
| Quoted Annual Rate | i = Ir(real risk-free) + Pi(premium for expected inflation) + Pd(premium for default risk) + Pl(premium for liquidity) + Pt*(premium for the term to maturity) |
| Payout | Payout Ratio = Dividends / Earnings Retention Ratio = 1 - Payout Ratio |
| Stock Splits | Stock Split = Price / (split) Owned Shares = Shares * (split) |
| DRIPs | Stock Price = Dividend * Shares Owned Shares = Price / Old stock price Old stock price * # of stocks owned old price - new price |
| Perpetuity Method | Perpetuity Method = Dividend / Required rate |
| Future Price Constant Growth Method | D5 = D0 + (N * G) P5 = D6 / (R - G) D6 = D5 + Growth rate |
| PEG Ratios | PEG = (price / EPS) / G |
| Dividend Yield | Discount Rate = Discount / Price |
| Conversion Price | Conversion Price = P0 / Conversion Ratio |
| Participating Preferred | Price = Dividend / Discount Rate |
| Conversion Options | Pc = Share w/ option + Share w/o option |
| Annual Price of Share | P0 = Dividend / Discount Rate |
| Quarterly Price of Share | New Discount Rate = Rate of Return / 4 P0 = Discount / new Discount Rate |
| Returns from funds that are weighted differently to different asset classes and sectors are known as | allocation effects |
| A larger Treynor Index, when compared to another portfolio's Treynor Index, generally indicates | better performance |
| The act of overweighting and underweighting different sectors or categories in a portfolio is called | sector rotation strategy |
| Attempting to outperform a benchmark or market by buying and selling investments is called | an active investment strategy |
| The evaluation of how portfolio management decisions seek to outperform a benchmark is known as | attribution analysis |
| When an investor holds a diversified combination of assets over a long time period in order to match a benchmark, it is called a(n) | passive investment strategy |
| After obtaining the return and category for investment comparison, the two most common ways to compare the funds are by | rank and average |
| A larger Sharpe ratio, when compared to another portfolio's Sharpe ratio, is | interpreted differently, depending on whether the portfolio is in a rising or declining market |
| When an investor attempts to associate asset purchases prior to a bull market and selling investments prior to a bear market, this is called | market timing |
| A measure that takes into account excess return relative to systematic risk is known as | the Treynor Index |
| If a portfolio has higher returns with a 60%/40% stocks-to-bonds allocation versus a 75%/25% allocation, this is known as a(n) | allocation effect |
| When using the typical models, such as the capital asset pricing model, the market return Rm proxy is generally the | S&P 500 Index |
| The interest rate that investors can earn without bearing any risk in a non-inflationary environment is known as the | real risk-free rate |
| The interest rate charged to banks from the Federal Reserve to borrow funds is called the | discount rate |
| The most frequently recommended metal for investors to consider during inflationary periods is | gold |
| Which of the following is NOT a component of calculating gross domestic product (GDP)? | Inflation |
| The monetary base measure of tracking changes in the money supply includes all of the following EXCEPT | checking accounts |
| Higher interest rates produce lower security prices because | higher borrowing costs will reduce the attractiveness of buying securities on credit |
| Which of the following economic impacts would lead to an increase in gross domestic product (GDP)? | Lowering the interest rate |
| Which of the following items is NOT part of the money supply known as M1? | Savings accounts |
| The onset of the COVID-19 pandemic caused the Federal Reserve to | rapidly drop the target federal funds rate close to zero |
| Which of the following commodities has not been recommended to investors during inflationary periods? | Meats |
| One strategy for investors to consider during periods of inflation include | shifting from financial assets to physical assets |
| The maximum amount that an investor in common stock can lose is | the amount of the investment |
| When comparing two firms, in order to properly account for growth, which ratio is best to use? | PEG ratio |
| The Shiller PE ratio was developed because | of the criticism that the PE ratio is too volatile |
| When comparing the constant growing dividend calculation with a finite calculation, what is the main difference in these formulas? | The need for future price |
| Which investment philosophy is focused on securities that are considered to be undervalued? | Value investing |
| The metric used to describe the amount of dividends paid during a given time frame relative to the earnings of the firm is known as the | payout ratio |
| The form of business that includes the issuance of a charter and common stock along with the establishment of bylaws and voting rights for stockholders is called a | corporation |
| Financial ratios are commonly used by all of the following parties EXCEPT | regulatory bodies |
| Which investment philosophy is focused on securities with a future potential that the market has not adequately priced? | Growth-stock investing |
| When a preferred stock offers investors an opportunity to receive extra dividends if a company meets its financial goals, it is said to be | participating |
| In the event of corporate liquidation, the participating preferred shareholder has the | right to receive the stock's purchasing price back as well as a pro-rata share of any remaining proceeds that the common shareholders receive. |
| Regarding dividends, a participating preferred stockholder will potentially receive | the preferred stock dividend plus a dividend based on some predetermined condition. |
| The price of a perpetual preferred stock is calculated by | dividing the dividend amount by the discount rate |
| Which of the following statements about callable preferred stock is true? | The firm may buy back the shares (usually at a premium) when it so chooses past a certain date |
| The valuation of a finite-lived preferred share must include the | amount that is repaid when the preferred stock is retired, which must be discounted back to the present value |
| Due to the probability of receiving extra dividends, the valuation of participating preferred shares is | greater than the valuation of otherwise equivalent cumulative preferred stock |
| In order for a corporation to take full advantage of the dividends received deduction, they should aim to own what percentage of another corporation? | 20%– 0% |
| If preferred shareholders are relying on regular dividends on their stock, they should avoid | noncumulative preferred stock |
| The dividend rate on floating preferred shares is typically set | quarterly or semiannually |
Created by:
Khall1229