Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
596 Cards in this Set
 Front
 Back
fixed
asset t/o 
sales/ net
pp and e 

Does the Dividend
DIscount model use COE or WACC 
Cost of equity


What is the
operating margin = 
ni/ revenues


Is Durbin watson appropriate for autoreggressive or tren models

trend models


iS PROPORTIONATE CONSOLIDATION ALLOWED FOR GAAP

IN VERY LIMITED CIRCUMSTANcES


what does the variance of an equally weighted portfolio approach as number of assets increases

its convariance


What is the equation for FCFE Coverage Ratio

FCFE Coverage Ratio= FCFE/ (DIvidends +share repurchases)


when is the opetion gamma and when is the gamma of options largest

Options Gamma is the rate of change of options delta with a small rise in the price of the underlying stock and when a call is at the money


what is the easiest way to solve for the delta of a put option

delta of call1


What does the Sharpe ratio=

(er risk free rate )/ Sd


What does the SML and the CML use as it slope

SML= beta
CML=Variance "The SML is based on the CML and both are equilibrium relationships." 

What does r squared equal

(total var unexplained var)/ total Var
also RSS/ SST 

What tests for heteroskedascity

breusch pagan


what is the durban watson statistic

2(1r)


What tests for serial correlation

durban watson


What is the t stat for serially correlated errors

resuidual autocorrelation for lag/ SE of residual autocorrelation


what is the mean reverting level

bo (1b1)


Whats the foreign exchange rule

follow the up the bid and multiply and down the ask and divide rule


What is uncover i/r parity

expected future spot rate * exchange rate


What do you have to do with payoffs for forward contracts

discount back


what is the equation for the fischer effect

fischer effect= risk free rate + expected inflation


What is the balance of payments equation

current acct + capital acct+ financial acct=0


expected interest rate differential (currency)=

I/R differential + expected inflation differential +Expected risk premium differential


What is the equation for the production function

total productivity factor *quantity of capital raised to alpha*qualtity of labor raised to 1alpha


What is the cobbdouglas function=

change in GDP= change in average productivity +change in average capital*alpha +change in average quantity of labor*(1alpha)


What does potential GDP=

long term growth rate in labor + long term growth rate in productivity


What intitially happens to investing cash flows when costs is capitalized

decreases


what does operating income=

EBIT


IS EBIT higher or lower under finance or operating lease

higher under finance lease


What cant the dubrin watson be used for

times series data


how many dummy variables are used

one less than the states of the world


Are forward contradcts subject to variation margins?.

no


What cost of capital is used target firm or acquirers firm

targets


When is regulatory capture an issue

Regulatory capture has always been a concern when SROs are used (Institute 692)


When reclassification is deemed appropriate how are prior periods restated

When reclassification is deemed appropriate, there is no restatement of prior periods at the reclassification date.


what is multicollinearity

A regression assumption violation that occurs when two or more independent variables (or combinations of independent variables) are highly but not perfectly correlated with each other


describe a dummy variable

takes on a value of 1 if a particular condition is true and 0 if that condition is false.


what is heteroskacity

The property of having a non constant variance; refers to an error term that is not constant across observations."
o Ex. CAPM different standard deviations for small and large firms 

what is serial correlation

• Serial Correlationregression errors correlated across observations


what is a unit root

"Unit rootA time series that is not covariance stationary is said to have a unit root."


what does the current account equal

difference between savings and investments


what is  increase in capital to labor

capital deepening


what is pareto optimal

pareto optimal= impossible to make one group better without making one worse


what is the dutch disease

currency appreciation driven by strong export demand for resources makes other segments of the economy, in particular manufacturing, globally uncompetitive. (often for resource rich countries)


what is the regulatory capture theory

Regulatory Capture TheoryRegulations often arise to protect those regulated


Describe level 1,2,3 assets

Level 1 Assets directly observable market prices
Level 2 Assets not as easily priced because they are not actively traded Level 3 Assets illiquid and value is not discernible 

common law vs. civil law

Common law interpreted by judges
Civil Law interpreted by legislation 

what is mutually exclusive

A statistical term used to describe a situation where the occurrence of one event is not influenced or caused by another event. In addition, it is impossible for mutually exclusive events to occur at the same time


Describe an equity carve out

involves the creation of a new legal entity and sales of the equity in it go to outsiders


spinoff vs. splitoff

• Spinoffshareholders of the parent receive a proportionate # of shares in the new entity, whereas the sale of a division results in an inflow of cash to the parent.
o Splitoff similar, in which some of the parents shareholders are given shares of the new entity in exchange for their shares in the parent 

What is the equation for harmonic mean

n/ sum (1/ Xi)


what is rachet

The contractual term enabling management of the private equity controlled company to be rewarded with increased equity ownership as a result of meeting performance targets is called:


What is a convertible bond arbitrage strategy

purchase a portfolio of convertible bonds and take short positions in the related equity security.


What is the difference between ordinal and cardinal measurement systems

Ordinal ranking because it only orders borrowers’ riskiness from highest to lowest
Cardinal Ranking rankings based on an amount 

What is key rate duration

Key rate duration is the sensitivity of a portfolio’s value to the change in a particular key rate.


What is active risk and what is another name for it

Active Riskthe standard deviation of active return. This risk is also often referred to as the “tracking error.”


What does orthagonal mean

uncorrelated


what method can be used to correct for serial correlation

hansen method and this helps to adjust standard errors


what types of distributions do hedge funds have

nonnormal and negative skewmess and positive excess kurtosis


In the treynor black model what is the weight of a security in the porfolio equal to

(alpha/ unsystematic risk) /(sum of (alpha/systematic risk))


if the OAS is less than zero, is the bond over or under valued

overvalued


what is tthe equation for justified trailing p/e

(1 payout)/ (rg)


what is tthe equation for Justified LEADING p/e

(1 payout) *(1+G)/ (rg)


under the neoclassical model what doesnt lead to long term growth

capital


what does the endogenous growth model say

social benefits mean that capital ldeeping leads to long term growth


what is the value of assets under dividend growth theory

e/r The srest of stock price= growth


What does the cash flow accruals ratio=

NI CFOCFI= accruals / Net operating Assets


How are pension plan assets and PBO reported under GAAP and under IFRS

Both report the funded status


what does periodic pension cost=

contributions change in funded status


are pension contributions reporting as operating, investing or financing activy

operating


Are a subsidiaries asset/s liabs restated for inflation underr gaap or ifrs and what is if anything restated

only under IFRS and nonmonetary assets/ liabs


Ina hyperinflationary economy under IFRS what method is used

temporal so functional currency will now equal parents presentation currency


difference between statutory and subsidiary merger

statutory= subsidiary ceases to exist as standalone


what type of merger defense is a leveraged recapitalization and what is it

postmerger and its when a company borrows money to buy back shares


Total asset t/o

Asset Turnover = Sales or Revenues/Total Assets


What is an option vega

The measurement of an option's sensitivity to changes in the volatility of the underlying asset


what happens to pension service cost if i/r increases

service cost and pbo decrease


how does a higher expected return affect pension expense

reduces it


WHAT HAPPENS to coe for residual dividend policy

increases (investor punnish unstable dividends


When is credit risk for a swap highest?

middle of swap


what does a low r squared indicate in terms of conditional heteroskedacity

low


under the temporal method how are unrealized and realzied gains and losses recognized

unrealized= not recognized
realized recognized on i/s through depreciation and COGS 

what is the equation to determined PVGO

p= (E/r) +PVGO..... NOtice E not dividends)


what does EVA=

NOPAT(WACC*capital)


What is the intrinsic value equation using a single period residual income model

bo+ (ROEr)/(rg)


is there a clearinghouse is forward or future amrkets

future


What types of countries will benefit most from capital deepening

those with a high alpha


How is the rentail price of capital calculated in the steady state

r= Alpha* Marginal Product of Capital (Capital/ GDP)


Under the Temporal Method how are remeasurement gains/ losses reported

I/S


How is the Cumulative translation adjsutment reported in OCI / Balance sheet comupted under the current rate method

Get a= D+e to balance for both periods


If an industry has high variable costs what is the rivalvrly and amount of entrace

high entrace and lower rivalry (the result is a lower need for economies of scale


What does the OAS spread reflect

adjustments for liquidity and credit risk


What does the intercet in a macroeconomi model=

expected return assuming no surprises


What is active factor risk caused by

standard deviations from benchmark standard factor senstitivities


what does standard error equal (equation)

(slope estimate hypothesized value)/ T Statistic


If the fisher effect holds how do interest rate differentials compare to inflation differentials

they are equal


WHat is the equation for the fischer erffect

nominal rates= (1+real rate)(1+inflation)


Is absolute purchasing power used to predict exchange rates?

no


when is relative purchasing power useful

for predicting long term interest rates (not short term)


What is the discount rate used to evaluate a specifc capital budgeting project

rate adjusted for risk


How are venture capital projects funded

primarily through equity and little use of debt etc (little leverage)


What is the equation for post money valuation

valuation= v/ (1+r)^T


How is the build up method calculated for required return

absolutely no use of betas


What is the equation for prepayment

SSM X (Beginning mortgage balancescheduled principal prepayment)


what is the equation for SMM

1(1CPR)^1/12


do currency swaos reflect the credit of one party

no


describe credit risk of counter parties in I/R swaps and currency swaps

I/R swaps it decreases over time and currency swaps maximum in the middle/ end (must swap the final payment)


What does an AR model predict

data from one period will eventually revert back to the mean reverting level


What is a sunset provision clause

revisit costbenefit analysis everytime the decision may be renewed


what is the equation for financial leverage

average assets/ average equity


What is the likely effect of a high degree of operating/ financial leverage in an industry

more price competition to defend market share/ cover fixed costs


Which of the following are least likely to relate to rivalry among existing competitors
A) A high degree of operating/ financial leverage B) a short product life C) high switching costs 
C)


What is the equation for Justified P to S

Net profit Margin (1b)*(1+G)/ rg


How can multicollinearity be determined

high r squared and low tstat


What does the going in capt rate=

Discount rate AKA NOI/ Value (therefore the discount rate= cap rate + growth rate)


What is the FStatistics

Mean regression sum of squares / mean square error


What does an interest rate collar consist of

long interest rate cap and short interest rate floor


What does a put option on a bond do

give the owner of a bond the right to sell it if it drops below a certain point. IT can be sold for higher than market value (so similar to an interest rate cap)


what is the bootstrap method on earnings

when the acquirer's P/E is hgiher than the target and the the acqusition and eps increases but earnings dont increase (meaning p/e also stays the same)


What does the static trade theory suggest

a company should lever up to the point where the additional costs of financial distress exceed the additional increase in tax shield


What does additional debt do to a capital structure? (agency costs)

it decreases agency costs i/r payments reduce free cash flow also (less waste)


what is the optimal capital structure?

the plan that minimizes the WACC


whatd oes miller and modligiani proposition 2 state

coe is a linear function of debt to equity ratio


in an equity carve out how are shares accounted for

minority amount of shares given to new shareholders and majority retained by parent (not given to existing shareholders)


How are spinoffs viewed by the market

favorably because they result in greater efficiency for the parent


what is the risk of poor financial disclosures known as

accounting risk


What does NOPAT=

EBIT (1T)


What is the Market Value Added equal to

Market Value of Total Capital (MV of stock + liabilities) BV of total capital


What is FCFE equal to

NI + depreciation change in WC  change in fixed assets


what is an assumption of cash flow duration

the same rate of prepayments will occur


What risk exists for futures and forwards

credit risk of forwards because they are not marked to market daily


if interest rates are flat what is the difference in prices between forwards and futures

nothing


What does the futures price converge to

the spot price otherwise abritrage opportunities exist


What is the equation for the adjusted Alpha and what is the weight of a security in an active managers porfolio

Adjusted Alpha= [
(correlation between realized and forecasted alpha of that asset^2)*Alpha] / Sum of (correlation between realized and forecasted alpha of that asset^2)*Alpha] 

Who does the standard of confidentiality apply to

clients former clients and prospects unless disclosure is required by law


what is the ruling on additional compensation arrangements

no gifts or anything are acceptible that may create a conflict of interest with the employer is allowed unless all parties consent


what is the requirement for record retentions

hold things for 7 years unless other regulatory guidance


what is a random walk

A time series in which the value of the series in one period is the value of the series in the previous period plus an unpredictable random error.


What is a probit model

• probit model, which is based on the normal distribution, estimates the probability that Y = 1 (a condition is fulfilled) given the value of the independent variable X.


What is a logit model

• logit model is identical to a probil model, except that it is based on the logistic distribution rather than the normal distribution.


What is a unit root

"Unit rootA time series that is not covariance stationary is said to have a unit root."


How is economic growth calculated

Economic growth is calculated as the annual percentage change in real GDP or in real per capita GDP.


What is a bear hug

Bear Hug merger proposal is delivered directly to Board of Directors


What is a tender offer

Tender offer offer to buy shares directly from
shareholders 

(a situation in which financial shocks spread from their place of origin to other locales;

Financial COntagion


is regulation and monitoring of the safety and soundness of financial institutions in order to promote financial stability, reduce systemwide risks, and protect customers of financial institutions.

prudential supervision


What is a requirement of long lived assets

tangible, or intangible, future economic benefits must flow to the entity from the use of the asset.


What is a synthetic lease

A lease that is structured to provide a company with the tax benefits of ownership while not requiring the asset to be reflected on the company’s financial statements is known as


What is A lease that is structured to provide a company with the tax benefits of ownership while not requiring the asset to be reflected on the company’s financial statements is known as

synthetic lease


investor who is defined as an investor who is very likely to be part of the next trade in the share and who is therefore important in setting price

marginal investor


Equity carve out

• Equity Carve Out involves the creation of a new legal entity and sales of the equity in it go to outsiders


Spinoff

• Spinoffshareholders of the parent receive a proportionate # of shares in the new entity, whereas the sale of a division results in an inflow of cash to the parent.


Splitoff

o Splitoff similar, in which some of the parents shareholders are given shares of the new entity in exchange for their shares in the parent


What ius the equation for the harmonic mean

 equation is easier to understand as xy. (weight 1*Y+ weight 2*X)


The contractual term enabling management of the private equity controlled company to be rewarded with increased equity ownership as a result of meeting performance targets is called:

rachet


WHat is a convertible bond strategy

Convertible bond arbitrage strategies purchase a portfolio of convertible bonds and take short positions in the related equity security.
Arbitragebased funds typically have a lower standard deviation of returns because they are the hedge funds that explicitly hedge. 

what has lwoer standard deviations Arbitrage based funds or hedge funds

Arbitragebased funds typically have a lower standard deviation of returns because they are the hedge funds that explicitly hedge.


When are fixed Income securities beneficial

declining spreads


Equation for daily standard deviation

Daily Standard Deviation annualized by multiplying times the square root of 365


WHat does ABS Stand for

ABSabsolute prepayment speed


What is active risk equal to

the standard deviation of active return. This risk is also often referred to as the “tracking error.”


What is another name for active risk

tracking error


What does FCFE equal

FCFE= CFOFCInv Net borrowing


which cost of equity model is liquidity factor applicabel to

Liquidity factor is only applicable to the PastorStambaugh model and not the Fama and French Model


When is the build up method used

 The buildup valuation method is usually applied to closely held companies when the betas are not readily available.


What is the vlaue of a 2 year IR put

Value of 2 year I/R floor= value of one year put + value of 2 year put


what is required for an upward shift in the production curve

advance in technology


What does GDp growth rate=

growth in TFp +alpha (growth in capital)+ (1alpha)*growth in labor


What is not include included in aproject cash flow prosoal analysis

interest because it is a financing cost


what smooths the returns of real estatte indexes and what is the impact

appraisal lag which results in a lower correlation with other classes


How can appraisal lage be mitigated

unsmoothing or using a transaction based approach


What is the income requirement of the old prudent man rule

earning income to compensate for inflation


Why is ROA different after translation

numerator translated at average rate and denominator transalted at current rate


How is Net Profit Margin different after translation

its not both numerator and denominator= translated at average rate


what effect does a high persistance factor have on dividends

low dividends


Value of 2 year I/R floor

Value of 2 year I/R floor= value of one year put + value of 2 year putNOP


What does NOPAT=

EBITx(1T)


What does MVA=

market value invested capital


what does clearn surplus relationship=

beginning book value+net income dividends


The belief that there are patterns/ reversals in in returns provides the rationale to use which indicator

relative strength


DOes IFRS and/or GAAP allow for reclassification into and out of held for trading

GAAP yes. IFrs generally not


what changes when SPE's are considated

assets/ liabilities equity but not income


how much of a board should be independent

75


What is the equation for the value using a one period residual income model

Bo+ [(ROEr)/rg]*bo


What type of r squared is used for a breusch pagan test

an r square of the regression errors based on the independent variable not an r squared of comparison between independent variables (i.e. not between jewelry and gold prices but between the r squared of the squared residuals from the original regression of the independent variable


Do hedge fund indexes or funds of funds have biases and what are they..

only hedge funds do and they are selection, survivorship. and backfill bias


What is merger arbitrage compared to

selling insurance.. make small profit if successful, large lose if not


what does a PSA of say 100300 idnicate

range in which preapayments is constant


What are the limitations on growth in the gordon growth

can eb negative (cant be greater than r)


What is the classical growth of GDP theory

an increase in per capita GDP above subsistence level is mean reverting


what is a poisin pill

make stock less attractive


Do all client communications need documentation

yes


What are some compliance procedures

pre clearance of trades and duplicate confirmations


do market conditions affect the bid ask spread between parties

yes


Does an increase in discount trade increase or lower pbo

lower which results in lower service costs


what does the swap spread measure

difference in the credit quality in the global economy


do hedge funds ior mutual funds use multiple of asset investments

hedge funds


What does merger arbitrage do

profit by taking a long position in the target and a short in the acquirer


What does the value of a combined firm equal

Value of acquirer + value of target + synergies cash paid to target


what do high yield issuers depend heavily on

bank debt


are transactions to minimize tax liabilities allowed

no


what do diversitures signal

bad news


What do negative alphas in a portfolio signal

they should be shorted


What does non recourse loan mean

cash flows come only from property income and value of property not from seizing assets


what does an AR model predict

series will eventually fall back to mean reverting level


In porters fiver forces if a company has high operating leverage what does this mean and what kind of competition does this cause

high fixed costs and high competition


what type of serial correlation have low standard errors

positive


when is a residual income approach most appropriate

if no history of dividends good fianncial reporting and negative cash flow


average spread over treasury spot rate curve

OAS


avergae spread over tresury yield curve

nominal spread


What type of relationship does correlation coefficient interpret

linear relationship


WHat is the equation for covriance

(xix bar)*(yiybar)/(n1)


spurious correlation

is a mathematical relationship in which two events or variables have no direct causal connection,


what is is the regression asusmption of the independent variables and residual terms

independently distributed and uncorrelated


is heterskedascity conditional (breusch pagan)

use whitecorrelated standard errors


What are the correlation for multiple correlation

nk1


what types of variation is anova

regression model or residuals


what is the equation for r squared

Regression sum of squares / sst


What is the f stat equal and the degrees of freedom

regression mean square/ mean squared error (k and nk1)


How can heteroskadascity be adjusted for

chaning regression coeffients


what is confidence interval equation

regression coefficeient +/(critical tvalue)(standard error of regression coeffient)


what are 3 problems with regression analysis and what are they

1) conditional heteroskadascity residual variance related to levvvvvel independet variables (hosuehold Income)
2) serial correlation residuals are correltaed (time series) 3) multicolliearity two or more independe variables are correlated 

what model should be used to measure seasonaility

loglinear


WHat is an ar model

dependent variable is regression against previous values of itself


when testing for serial correlation what model should be used

not durbin watson (use ttest)


what is the 3 step process to see if something is covariance stationary

1) plot data to see if mena and variance is constant
2) run ar model and test for correlation 3) perform dickey filley test (test for unit root 

What is the mean reverting level for a covariance stationary ar model and if there is no covariance stationary how can you correct for it

its defined and first differencing can correct


is a unit root covariance stationary

no


does a random walk have a unit root

yes (correct by first deferencing)


Is the mean reverting level definied in a random walk

mean reverting level is undefined


do random walks have serial correlation

no


what is used to assess the predictive abitlity of ar models

root mean squared error.


what is root mean square errors

used to asses the predictive accuracy of autoregressive models. it is the square root of the average square error


what does it mean for variables to be cointegrated

error term from regressing one against the other is covariance stationary


How do you asses if an autregressive model against two variables is good

if both variables=covariance stationary, model= reliable
if one is, then not relaibles if both are not test for cointegration. if conitegration= covariance stationary 

Are exchange rates covariance stationary

no its a random walk ( no serial correlation)


what does it mean to be a random walk

IF random walk prior perido= good predictor of future period (high r squared)


What is the order of the assessment of a time series model

is it covariance stationary if yes use first differencing
is there serial correlation (durbin watson model) if yes auto regressive model Check for arch if arch model = not good the use ar 2 model and start over 

When does covered interest rate parity hold

when forward premiums or discount exactly offset differences
Covered i/r gives no arboitrage forward xrates and uncovered gives expected future spot rates 

when does uncovered i/r parity hold

expected future spot rates (instead of forward exchange rates ) equal i/r differentials (This isn't a traded value)
Covered i/r gives no arboitrage forward xrates and uncovered gives expected future spot rates 

DO covered and/or uncovered i/r parity hold by arbitraged

only covered


over what time period do covered and uncovered i/r parity hold

covered= short and medium term
uncovered= long term 

what is the future exchange rate an unbioased

covered and uncovered i/r parity hold


what does fx carry trade seek to profit from and what is it

uncovered i/r parity and it involes longing high yield curreny and shorting low yield


what is the flight to saftey

low yield currencies= safe haven during credit crisis


what is the current account

trade balance


when is sterilized intervention used

when inflation is a concern


What is the difference between sterlized and unsterlized

sterilized money base doesnt changed (gov't just buys or sellls some currency


what is the international fishcer effect

nominal i/.r= real i/r +/ expected inflation


what is the difference in returns by changing various parts of the cobbdoudflag function

constant returns to scale


what does classical growth theory say

growth in real gdp= mean reverting when above substitence level


permanent increase in gdp due to increase in savings rate

endegenous theory


what is absolute covnergence

lkess develop countries will converge in terms of standard of living


reallocation of capital= permanent increase ine conomic growth rate

endegenous growth theory


when are independent SROS (self regulatory agencieis effective

when properly supervised by regulatory authorities


what is an SRO

self regualtory organization


what is regulatory capture

a regulatory body will eventualy be controlled by the industry that it is supposed to regulate


is inventory allowed to be revalued ifrs vs. gaap

ifrs


what is inventory valued at ifrs

lower of cost or nrv


what is inventory valued at gaap

cost or market


what is used to comare whether fixed assets are properly maintained

cap ex to average depreciate rate


how often is goodwill measured for impairment ifrs vs. gaap

ifrs anually
gaaplost event 

asset impairment Gaap

if carrying value= less than undsciounted cash flows at reportin unit level impairment amount= carrying value discounted cf


asset impairment ifrs

CGU level whenrecoverable amount is lower than greater of fair valuecosts to sell and value in use


how are long lived assets value ifrs vs gaap

ifrs= hc or revaluation model (must be consistent within classes)
gaap= hc 

WHAT INTEREST RATe method does ifrs use and what about gaap

ifrs= expected life and gaap= contrcat life


Is non redeemable preferred stock debt or equity

equity


where are unrealized foreign exchange gains/ losses recognized

oci for gaap and i/s for ifrs


in an acquisition i
f fv>bV how is it recorded and if bv>fv 
amortize over life
expense 

How is partial goodwill method recorded

% share of subsidiaries identifiable assets bv


is d/e greater under goodwill or partial goodwill

partial


what is the equtiy for equity method vs proportional consolidation

the same


what is the goal of SPE

obtain low cost financing


What are the criteria to see if an entity is a vie

1) issuficient at risk equity
2)shareholders lackd ecision making rights 3)shareholders do not absorb losses 4)shareholders do not receive residual benefits 

What does plan assets=

fv at beginning of year +
contributions+ actual return benefits paid 

how aree actuarial gains/ losses dealt with gaap vs. ifrms

gaap= amortized under coordior method
ifrs= not amortized 

how is share based compensation recognized

amortized over vesting period based on fv at date of acquisition


under temporal method and current rate method how are cogs and depreciation accounted for

temporal= historical rate
current rate= average rate 

under temporal method and current rate method how are equtiy accounted for

temporal= miced
current rate= current rate 

how are non monetary assets/ liaba ccounted for under temporal method

historical rate


what is the exposure for
temporal method current rate method 
1) net monetary asset
2) sE 

when a highly inflationary economy what does ifrs say

ifrs says restate for inflation then translate into parents
(ONLY NON MONETARY ASSETS/ liabs= restated 

when a highly inflationary economy what does gaap say

gaap says no restatement but remeasure


what is the exposure under temporal method (list accounts)

cash + ar AP current debt lt debt


how are fair value hedges recognized

i/s


how are cash flow hedges recognized

equity


what is the balance sheet based accruals ratio=

(NOA end NOA beginning)/ Noa end+ noa beg /2


WHAT IS THE CF BASED accruals ratio

(nicfocfi)/ (NOA end +NOA beg)/2


how does inflationeffect affect cash flow analysis

adjust them down


What does economic invome =

after tac cash flow economic depreciation (change in MV)


what does eocnomic profit=

nopat wacc


what is claims valuation

seperate cash flows based on equity vs. debt


what is residual income and what is the equity charge portion

nI Beginning BV of equity *Cost of equity


what does mm proposition 1 iwth no taxes say
What does mm prostion 2 say with no taxes what does mm proposition 1 say (with taxes) 
1) capital structure= irrelevant
2) capital structure increases linearly as a company increases proportion of debt financing (benefits of using more debt exactly offset rise of cost of equity 3) value= maximized at 100% debt 4) value= maximized at 100% debt 

what is the static trade off theory

balance benefits of debt (tax) with costs of financial distress (THERE IS AB OPTIMAL CAPITAL STRUCTURE)


if the legal system= stronger is more or less debt used and what is the maturity of this debt

less and longer


if there is more or less information assymetry is more or less debt used and what is the maturity of this debt

less and longer


what is the equation for a stable dividen policy expected dividend

previous dividen + (expected increase in eps)*(target payout ratio)*adjustment factor)


Explain the 3 types of dividend [policies

1)residual earnings earnings  capital budget* equity eprcentage in capital budget)
2) constant= % of earnings 3) stable use adjustment factor to move towards stable rate 

How is a residual dividend policy calculated

1)residual earnings earnings  capital budget* equity eprcentage in capital budget)


Calculate dividends under double tax rate system

(1corporate rate)*(1 individual rate)


Calculate dividends under split rate

dividend rate= lower and corporate rate= still the same


Calculate the dividend under the imputated rate

actually taxed at corporate rate and then idnvidiual rate..
however, effectively taxed at shareholder rate ( so if shareholder rate= less than corporate rate receive difference) 

what must be approved by shareholders and what %

stock purchase by 50% (not the case for asset purchase)


who pays corporate taxes in a stock purchase

non one


who pays corporate taxes in a stock purchase

target company


wo pays shareholder taxes in a stock purchase

stockholders


wo pays shareholder taxes in a assets purchase

no one


what type of defense is a fair price ammendment

preofferr


what type of defense is a golden prachute

pre offer and it is when if they are terminated after buyout they get buyout


what is greenmail and what kind of defence

target purchases shares back for acquirer at premium an dpostoffer


is a share repurchase a pre or post offer defense

post


what is a pacman defense

target offers to buy acquirer


what are the thresholds for HHI and what change= maybe antritrust

under 1000 nothing
10001800 maybe if 100+ change >18000= 50+ change 

what kind of takeover premium is there for comparable company and comparable transaction

only for comprable company


the more confident the parties are in a merger of the synergies who wants stock and who wants cash

acquirer wants to pay cash and the target wants stock


what is the ibbotson chen model

supply chain [1 +inflation][i + growth in real earnings][1+p/e growth]1+expected income component rf


What does the fama french model include

market risk premium
big/s mall value high bv low bv 

what type of model is the bond yield + risk premium

build up model


If level of debt is always changing should fcff or fcfe be used

fcff


when fcf is negative what valuation method should be used

residual income


when model is good to use for stable mature companies

gordon growth


what is the prat model composed of

net profit margin
financial levergae= total assets/ total equity asset turnover= sales/ total assets retention rate 

How is fcff calculated from ocf

ocf + interest*(1T)  FC investment


how does leverage affect fcfe and fcff

only fcfe barely


what does justified leading p/e=

(1b)/(rg)


what 2 things does the justified PEG ratio assume

1) only growth= due to inflation
2) linear relationship between p/e and growth 

What is the justified PEG

[(1+Inflation)*Eo]/ (rg)
or PE/G 

is book value good for financial institutions

yes liquid assets


what is justified p/b

(ROEg)/ (rg)


what are tha advantages to price to sales

ratio is good for distressed firms
sales are not as easily manipulated sales are not as volatile as earnings useful to value startups 

what is justified p/s

[eo/so]*(1b)*(1+g)/ (rg)
Net profit margin * justified trail p/e 

what is more stable earnings or cash flows

cashflows


what does enterprise value=

MV debt +MV equity  cash and short term investments


which model of valuation assumes a clean surplus relationship beginning + BV + earnings  dividend

residual income model


what does the cost approach to real estate valuation=

value of land + replacement cost of building adjsutments for depreciation and obsolescense


How is the income approach calculated and what does NOi=

noi/ CAP RATE
noi= NOI calculated before subtracting financing costs and income taxes 

what does the cap rate =

discount rate growth rate


What two real estate ratios are used

debt service coverage ratio
loan to vlaue 

what does debt service coverage ratio=

first year NOI/ debt services


what kind of reits are affected by job creation

residential office and shopping and terail


are industrial reits affected by job creation or population growth

population growth


what is the huge concern for hotel reits

financial leverage as income is super variable


what affects storage retis

population growth and job creation


what does navps=

assets liabilities using market prices


what does funds fromoperations=

net income + depreciation expenses+ deferred tax charges gains/ losses from sales of property


What is the goal of adjusted funds from operations

more represetation of current economic income


AFFO=

ffo non cash (straight line) rent adjustment recurring maintenance type capex and leassing commision


what is non cash rent

Noncash rentAn amount equal to the difference between the average contractual rent over a lease term (the straight line rent) and the cash rent actually paid during a period.
"The amount of this deduction is the difference between the average contractual rent over the leases’ terms and the cash rent actually paid.) " 

what is used more often and why AFFO or FFO

FFO because AFFO is more subjective and uses mroe estimates


what is a tag alone drag along clause

any time an acquirer acquires control of the company they must extend the acquisition offer to all shareholders including firm management


what is an earnout

acquisition price paid is tied to future performance (often for joint venture companies)


are venture capital firms able to grow through subsequent funding

no hard to get subsequent funding


What is paid in capital

% of of commited capital used by the GP


what is Distributed Paid in capital

cumulative distributions paid to the LP and it is net of mgmt fees and carried interest


How is a 220 psa calculated

months of seasoning *2.2*.2


generate cash inflows primarily from the sale of developed or improved properties as opposed to recurring lease or rental income

reoc


what are the classic symptoms of multicolliearity with r2 f stat an t stat

significant r squared and f stat but not t stats


what is the null hypothesis for the dickey fulley test

that the g1 o so there us a unit root and the data is not stationary


how is fifo assets adjusted for LIFO reserve

add in the full lifo reserve


Given these two conditions compensation is expensed over how long
Options cannot be exercised for 4 years and expire in 10 years from the grant date. Based on prior experience, it is estimated that options are exercised, on average, in five years. 
4 years


what affect do stock award plans have on debt to equity

The new stock awards plan will have no effect on the debt/equity ratio because there will be no change in equity: Retained earnings will be decreased by the amount of the expense and paidin capital increased by an equivalent amount.


what does after tax operating cf=

sales cogs operating expenses + Deprecitaiton *(1T)


what is the non operating tax cash flow in the final year of project

sale of division less the taxes paid on the capital gains plus the net working capital that is recovered.


What does the sustainable growth rate assume will finance growth

A is correct. The sustainable growth rate model assumes that the growth will be financed with the issuance of debt and only internally generated equity to maintain a target capital structure. No additional common equity will be issued. The ROE is assumed to be a constant during this period.


What is a receiver swaption

gives the owner of the swaption the right to enter into a swap in which they will receive the fixed leg, and pay the floating leg.


what is a payer swaption

gives the owner of the swaption the right to enter into a swap where they pay the fixed leg and receive the floating leg.


what is the best way to compare bonds with or without options

look at the Zspread of one bond and the option adjusted spread of the other whichever is greater is undervalued


what does the information ratio measure

The information ratio is a measure of the contribution of any new security to the performance of the active portfolio.


is this a limitation on growth?

Has a relatively low level of capital per worker.


When calculating interest expense for interest coverage ratios what is included in interest expense

interest expense + capitalized interest


what does the cash flow accruals ratio=

(ni cfocfi)/ average noa


what is the equation for expected dividend

previous dividend + (change in earnings)*(target Payout Ratio)(adjustment years)


GGM equity risk premium estimate = based off of equity index

Dividend yield on the index based on yearahead aggregate forecasted dividends and aggregate market value Consensus longterm earnings growth rate Current longterm government bond yield.


What type of model is the ibbotson chen model

macroeconomic model


When using a series that has such survivorship bias, however, the historical risk premium estimate is adjusted how

should be adjusted downward.


What is the molodovsky effect

High P/Es on depressed EPS at the bottom of the cycle and low P/Es on unusually high EPS at the top of the cycle reflect the countercyclical property of P/Es


how much does share price drop after the dividend is paid

(1Td)/(1CG)


Which method allows for valuing working capital, fixed assets, and intangible assets using different discount rates.

The excess earnings method (EEM)


what does the Old prudent man rule say about
1) risk taking 2) What kind of returns to base decisions off 3) what about diversification 
only take mild risks novequitvsecurities.
And judge based on actual returns not total returns. Ignores diversification 

what does the new ivnestor rule say about income

balance current income against growth
can look at Current income + capital gains 

what kind of t values do you want

high


what are the five goals of the new investor rule

Careful
Skilled CAution Loyalty Impartial 

How often is disclosure of referreal fees required

quarterly


what is a protective put strategy

long stock and long put


what is a covered call

by a stock and sell a call


what types of returns are there for commodities

colalteral yield
price return roll yield 

what is the calculation of the absolute spread

higher yield lower yield


what is the calculation of the relative spread

(yield on subject bond/ yield on benchmark bond)1


yield ratio

(yield on subject bond/ yield on benchmark bond)


does a call option increase or ddecrease yeild spreads
does a put option increase or decrease yield spread 
call= increases spread
put= decreases 

the value of an S& P index futures contract is how many times the level of the index

250


what is a call provision on a bond

issuer can repay principal prior to maturity


How do TIPS work

coupon is fixed percentage of par. Par is adjusted for inflation


what are three types of hedge fund biases

survivorship
backfill bias selection (better firms are more likely to report) 

Do hedge fund managers of mutual fund managers get more performance fees

hedge funds because mutual funds must share in losses too


What is notching

process pf assigning differnt ratings to bonds of the same issuer


what is structural subordination

when a subsidiary restricts the flow of assets to the parent util the subsidiaries debt is satisfied


What are the 4 c's of credit analysis

capacity
collateral covenants character 

what is the equation for convexity and duration

return= modified duration * chnge in spread + 1/2(convexity * (change in spread))^2


what is a change of control put

debt holders can require the issuer to buy back debt in the event of an acquisition


what kind of credit ratings do governments get assigned

local currency debt rating and foreign currency debt rating


Which ratings are generally lower and why
local currency debt rating and foreign currency debt rating 
foreign currency debt rating because higher default rate as government must purchse foreign currency in open market to make payments


what has higher credit risk general obligation or revenue bonds

revenue (debt payments strictly come from revenue)


what is the debt service ratio

ratio ofprojects net revenue to interest and principal payments


which i/r benchmarkt is preferred
gov't bond yield curve or swap rate (libor curve) 
swap rate


does the liquditiy preference theory say premium is directly related to maturity

yes


does the preferred habitat theory say premium is directly related to maturity

no


what is particularly useful in measuring the effect of a nonparralel shift in the yield curve on a bond porfolio

key rate duration


" a measure of spread that the investor would realize over the entire Treasury spot rate curve if the mortgagebacked or assetbacked secu rity is held to maturity. "

zero volatility spread


" is the spread that will make the present value of the cash flows from the mortgagebacked or assetbacked security when discounted at the Treasury spot rate plus the spread equal to the price of the security"

zero volatility spread


How are interest rates adjusted for a capped floater

when I/R exceeds cap, coupon is substituted equal to cap


What is the value of a puttable bond

valuable of a putable bond value of nonputtable bond


what types of risks do nominal spreads account for

liquidity
credit risk option risk 

what is the minimum value of a convertible bond

greater of conversion value or straight value


what does the value of a callable convertible bond value=

straight value of bond + value of the call option on the stock  value of the call option on the bond


what happens to the value of the call o n the stock and the value of a callable convertible bond when stock volatility increases

both increase


what happens to the value of the call o n the stock and the value of a callable convertible bond when i/r volatility increases

value of call option on stock increases and the value of the bond convertible bond decreases


on a callable convertible bond what is the payback eqwual to

conversion preimum / favorable incomde differential
favorable income differential per share= coupon interest  (conversion ratio * CS diluted per share)/ conversion ratio 

what does condtional prepayment rate=

annual rate at which mortgage is prepaid (single monthly mortality= monthly prepayment rate


are prepayments higher for new or older mortgages

older mortgages


when does bond extension risk occur

when interest rates rise


What does regression analaysis assume about the correlation about the dependend or independepend variable and residuals

assumes independent variable is uncorrelated with residuals


what does standard error of estimate (SEE) is equal

the square root of the
mean squared error: 

what does the presence of conditional heteroske dasticity results in in terms of parameter estimates, standard errors, t statistics, and f statistics

consistent parameter estimates, but biased (up or down) standard errors, tstatistics, and Fstatistics.


How is root mean square calcualted

i. Take the difference between the actual and the forecast value. This is the error.
ii. Square the error. iii. Sum the squared errors. iv. Divide by the number of forecasts. v. Take the square root of the average. We show the calculations for RMSE in the table below. 

IF covered and uncovered i/r parity hold then

Thus, the forward exchange rate is an unbiased


does expansionary fiscal policy= appreciation or depreciation of currency in the long run

depreciation


If capital mobility is low, and monetary and fiscal policy are high what happens to currency..

appreciates


Foreign exchange reserves tend to increase or decrease before a currency crisis.

decline


Broad money growth in nominal and real terms tends to rise or fall sharply in the two years leading up to a currency crisis,

rise


peaking around 18 months before a crisis hits. In the period leading up to a currency crisis, the real exchange rate is lower or higher than its mean level during tranquil period

higher


What does increase in capital deepening equal=

growth in TFP growth in labor productivity


Who should referal fees be disclosed to

clients, prospective clients, and employers


When is additional compensation allowed

properly disclosed to all parties and written consent from all parties involved


a transaction that involves the payment of a commission

Agency Trade


a transaction that involves discount or a spread, as the broker owns the security

Principal Trade


research generated by the broker

Proprietary research


What is the rule regarding research performed by a broker paid by the clients

must directly ssist manager in investment making process and not in management company itself (if it benefits both it is mixed used research


what is the rule on mixed use research

Client brokerage can be used to pay for mixeduse research with the caveat that the research must be reasonable, justifiable, and documentable, and that the client brokerage is only used to pay for the portion of the research that will be used in the investment decisionmaking process.


Is it permissable to use client brokerage from agency trades to obtain research if it may not directly benefit the client

yes as long as over time it does


Is it permissable to use client brokerage from principal trades to obtain research if it is used to benfit other clients

yes if client consents


Are research objectivity standards or soft dollars mandatory

no both are optional


are absolute (buy, sell, hold) or relative market outperform etc. recommendations allowed

both


Can a person express their opinion/ beliefs on the CFA designation

Yes


What is the ruling on using client brokerage (soft dolalrs)

only can use if meets definition of research


what is the required communication with clients regarding soft dollars

send clients annual statements confirming maintainenace of soft dollar standards


What does period pension cost =

net change in Pension funded status + contributions


What does net operating assets=

" Net operating assets = (Assets – Cash and shortterm investments) – (Liabilities – Total debt), "


"A warning sign that a company may be deferring expenses is sales revenue growing at a slower rate than:"
\ 
P,P, and E


What does "PP&E growing at a faster rate than sales indicate

that expenses may be inappropriately capitalized."


"Total accruals measured using the balance sheet is most likely to differ from total accruals measured using the statement of cash flows when the company has made acquisitions:"

"Stockbased acquisitions do not flow through the cash flow statement."


do early trances or later protect against extension risk

early


what are accrual bonds

often have z tranche interest accrues with principle until all paid off at end


in an accrual bond what tranch absorbs most of extention riski

z tranche (end one)


what is a planned amortization tranch

tranches are amortized based on sinking fund within range of prepayment speeds (initial PAC collar)


do planned amortization bonds have high and / orlow extension and contraction risk relative to support tranches

lower for both


if i/r falls what happenes to inerest only strips

value falls becuase prepayments increase


do interest only strips want high or low prepayments

low


do principal only strips want high or low prepayments

high


what are nonrecourse loan

lender can only look to collateral to repay loan. cant sue further etc.


what kinds of mortgages are structured as non recourse loans

mortgage


what level call protection is provided by segregating pools into credit tranches

CMBS


what level call protection is provided by prepayment penalty points. yield maintenance charges, prepayment lockout etc.

loan level call protection


what is the problem with thirdparty gaurantees

if their credit quality isn't higher than the issuer, they serve no value


what kind of credit enhancement is an excess servicing spread

internal


what is curtailment

a partial pament


what is the lockout period or revolving period"

"The period of time for which principal repayments are reinvested rather than paid out to the security holders is called the


is refinancing important for autoloans

no because rates are already below market price


how volatile are manufactured housing MBS's and why

not very because loan balance= small and borrowers have low credit ratings so hard to finance


whata re the 3 periods in student loan

deferrment period
grace period loan repayment period 

what are sesoned prepayment speeds

speeds have stablized


what types of assets back abs's

amortizing and nonamortizing


Describe the collateral of nonamortizing abs's and give an example

ever changing and credit card loan


what is a synthetic cdo

bondholders take on the risk of the underlying assets but not the legal ownerhsip


what is the ramp up period

period in which mgmt invests funds of a cdo


What is the cash flow yield

discount rate that equates the price of the MBS or the ABS to the PV of cash flows


what are the 3 definiciencies of the cash flow yield

1) assumption of reinvestment at same rate
2) assume ABS or MBS= Held to maturity 3) assume cash flows will be realized 

what doe soption cost=

zerovolatility spread option adjusted spread


what have a higher oas pac or support tranches

support


if the amount of cash lows are i/r dependent what spread is used and what are examples

home equity mbs and oas from monte carlo model


if the amount of cash lows are not i/r dependent what spread is used and what are examples

callable corporate
OAS from binomial model 

what is the value of a forward during the life of a contract

St FP/1+r^t


what is the value of a forward during life of contract

St PV dividends FP/1+r^t


what investments tend to have longterm equity returns with less risk

commodities


desribe default risk between futures and forwards

futures have none because marked to market daily.


if the corelated between underlying asset value and interest rates are positive than is a future or forward preferred

future because gains from marked to market cna be reinvested immediately


The Fama–French model incorporate what risk factors

s market, size, and value risk factors. One possible interpretation of the value risk factor is that it relates to financial distress.


what is PEG ratio based off p/Eo or P/E1

p?E1


what is P/bo

(ROEG)/ Rg)


what is P/S=

Net Profit Margin *(1b)(1+g)/(rG0


what is another name for prepayment option

call option


who pays expenses in gross lease

owner


who pays expenses in a net lease

tenant


what is a put option on a bond and what is the effect on i/r

Put Provision creates the right to give bond back to the firm if yield increases. As a result of this option. The ytm is lower than a normal bond


what type of relative valuation measure is good for banks

price to book


what type of DCF method is approriate to use for income method for realestate if there are mutiple growth periods

"A direct capi talization method would not be appropriate due to the multiple growth rates. A discounted cash flow method that assigns a terminal value, or a layer method, should be used."


what are the most significant valuation components for FFO and AFFO valuation

growth and leverage


How is NOA calculated for a reit

PV of NOI +cash/ receivables debt/ liabilities


what does FFO=

"FFO = accounting net earnings, excluding: (a) depreciation charges on real estate, (b) deferred tax charges, and (c) gains or losses from sales of property and debt restructuring."


"The exit route for a venture capital investment is least likely to be in the form of a(n):
A initial public offering (IPO). B sale to other venture funds targeting the same sector. C buyout by the management of the venture investment." 
Buyout by the management of the venture capital firm because "Leverage needed to finance a management buyout is not readily available to firms with limited history."


what does the reduced form model assume

some of the company's debt is traded and the assets dont trade


what does a structural model compared to a reduced form model assume

assumes the assets trade


"The reduced form model produces credit risk measures that reflect what

the changing business cycle. "


What is the average life for a bond

projected principal repayment/ 12* tranche repayment


what does a lockout period for a bond=

"not repaid to bondholders)"


"Normal backwardation is what and what is backwardation

normal backwardation=defined as “futures prices are lower than expected spot prices.”"
backwardation= future pricfes are less than spot prices 

when is the roll yield

backwardation


WHat is the risk netural probability of an upward move in price of stock {{{{ This is used for option hedging}}}

[(1+rfSize of doward movement {%of previosu state}]/ Up stte Down state


What does thehedge ratio do and whats the equation

number of stocks that needs to be purchased to neutralize options written
(C+()C)/ (S+()S) 

what kind of distribution does the black scholes mertins model assume is followed

lognormal


what does the black scholes model assume about assets and cash flows

generates no cash flows


what kinds of investments cant be prices by black scholes mertins

interest rate options and options on bond prices because the assumption of constant rrf is violated


what is vega for BSM

volatility


what is an option delta

change in call price/ change in stock price


what is the range of delta for calls
and for puts 
0 to 1
1 to 0 

what does the gamma of a stock price measure

curvature rate of change of the delta


What does AAR

Accounting average return
Average NI/ Average BV (notice if an asset is 200K and depreciated to 0, average BV= o 

What does profitability index=

1+NV? initial investment


What is residual risk

the leftover risk that canot be attributed to the beta systemativ risk of the portfolio


Does relative PPP hold over short or long term

long term


What is the macroeconomic balance approach

how much current exchange rates need toadjsut to get current account to balance


What does uncover i/r parity state for high i/r and low i/r currencies

high i/r currency should depreciate relative to a currency with a lower i/r


Is covered or uncovered i/r parity covered by arbitrage

covered


Does the carry trade work well during high or low volatility periods

low


is the carry trade profitable if uncovered i/r parity holds or doesnt hold

doesnt hold


what types of filters re there for the carry trade

volatility filter
valuation filter 

Describe expansionary fiscal policy under high and low capital mobility

high mobility (capital flows dominate so expansionary policy increases i/r increases demand for currency which is appreciation but (economy grows so current account deficit depreciates currency so result is ambiguous
low monbility (trade flows domiante so depreciation) 

Describe expansionary monetary policy

expansionary= decrese i/r and currency depreciation


what is a fixed exchange rate regime

government fixes the rate of exchange of its currency relative to one of the major currencies


what does the monetary model assume for currency valuation

output is fixed


what does the mundell fleming model assume

inflation is not a factor


what are two types of monetary models

pure monetary and dornbusch overshooting model


wha tis the dirnbusch overshooting model

prices are not flexible in short term


what is the portfolio balance model for currency

mundell fleming take short term few and this is long term impact of sustained fiscal polciies


are developed markets central banks effective at itnervening in the foreign exchange markets

no due to lack of adequate resources


for a currency swap how can credit risk be reduced

netting or marking to market


in a cds who is exposed to counterparty credit risk and when does this happen

protection seller if premium payments arent mad eand this is a concern when market CDS soreads are lower than the contracted spread rate


what is the variance of a 2 investment portfolio

[w1^2*sigma1^2]+[w1^2*sigma1^2]+2W1W2*correlation*sigma1*sigma2


where si the global minimum variance portfolio

all the way to the left


is the line from the rff to the pint of tangency on the efficient frontier

capital allocation line


point of tangency between the CAL and the efficient forntier represents what

the best risky portfolio


When is an investment beneficial to add to a portfolio

if sharpe ratio of a security is greater than the prtfolio sharpe ratio* correlation between new security anf portfolio


what is the slope of the sml

market risk premium


wha tis the slope of the CML

market portfolio sharpe ratio


what does the ebta of a security=

covariance between security and market/ SdMarket^2


Which model uses unexpected changes (surprises) in macroeconomic variables to explain asset returns

macroeconomic model


is an edqulibrium asset pricing model similar to CAPM that makes less restrictive assumptions

APT


what does active risk squared =

active factor risk + active specific risk


what does the information ratio=

active return/ active risk


What does the optimal level of residual risk=

IR/ 2X riska version level


what is the assumption of the treynor black model relating to efficieny

indexes are nearly efficient and that the number of misprice securities is limited


what types of securities does the treynor black model penalize

high unsystematic risk securities


What happens to the ability to tolerat risk as size of portfolio increases

increase


what is the rulling on gifts disclosure

disclose to employer ideally prior to acceptance


Cans someone promote a bank CD as gauranteed

yes as long as FDIC limits are disclosed


is an analyst conference call public disclosure

no


what two measure relating to ipos and porivate placements are there for traders

limited participation in equity IPOs and restrictions on private placements


what is the t stat fir sugnificance of correlation

r*(square root of (n2))/(square root of (1r squared))


If you have CDS protection and the spread shrinks do you win or lose money

lose


WHta kind of trades
are transactions that involve payment are transactions that involve a discount or spread 
agency
principal 

What trades can research be used to benefit other clients with disclosure to client

principal trades


How often must compliance to research objectivity standards be affirmed

annually


what is the degrees of freedom for a tstat for test of correlation

n2


What does rejecting the hypothesis for an Ftest mean

at least one y variable is significantly different than 0.


What is R in 2(1r)

correlation of residuals from one period to the next


When is durbin watson inconcolusive

when between Di and Du


What model calculates a model based on normal distribution

probit


what model produces a score to classify things intop categories

discriminant


what model cant be used witha utoregreswsive models

DW


If there is serial correlation in an autoregressive model whats the impact

model is incomplete


What is the SE for an autoregressive model

1/ square root of N


How is the RMSE compared to the SEE

The RMSE is the SEE version for multiple regression


If there is a unit root what is the mean reverting level

undefined


When determining cross spreads with Bid and ask prices, how are they determined

(multiplying the Bids and Multiplying the asks)


What does covered i/r parity say about high i/r and low i/r rates.

High i/r will deprecitate


What is the relationship between PPP and pure monetary model

PPP Will always hold


What kind of cash flow is capitalized interest

CFI (contrary to most interest which is CFO)


How is R and D recorded under GAAP and IFRS

IFrs D is capitalized
GAAP All is expensed 

how is change in deprecition methods reported

prospectively


How does greater expected return on plan assets affect PBo and Pension expense

no affect on PBO and decreases pension expense


How is hyperinflation dealt with under GAAP and IFRS

GAAP used temporal method
ifrs restated for inflation and then current rate method 

What doess MM Proposition 1 with out taxes say

value of firm unaffected by capital structure vl=vu


What doess MM Proposition 2 with out taxes say

wacc unchanged by leverage


What is bootstrapping

positive impact on EPS from stock sale


What is the conglomerate discount

sum of the parts market price


What is justified Price to dividends

(rg)/(1+G)


What is residual Income equivalent to

financial profit


How are management fees calculated for private equity firms

as a percentage of commited capital


Does a positive butterfly have more or less curvature

less


When prepayments increase, do support or PAC tranches have more contraction risk
when prepayments fall, do support or PAC trances have more extension risk 
support for both


What does relative PPP state

The relative version of PPP states that the percentage change in the spot exchange rate
will be completely determined by the difference between the foreign and domestic inflation rates 

convergence is associated with which growth model

neoclassical


What is another name for the residual income model

excess earnings model


How are income statement items and dividends recorded using the current rate method

income statement items= average rate
dividends= historical rate 

SHould FCFE or FCFF be used when
dividends differ significantly from the company’s capacity to pay dividends or when a change of control is anticipated. 
FCFE
