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51 Cards in this Set
- Front
- Back
zero coupon bonds
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buy bond at discount and paid full value at maturity, no interest
ie. t-bills |
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Call provision, callable vs not
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could be redeemed or called before maturity date, co. can refinance debt, riskier higher yield
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secured vs. unsecured
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specified asset you receive if co. defaults
vs. debentures, no asset, higher yield, increased risk |
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par value
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listed on bond, value of bond when issued and when matured, usually $1000
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If interest rates decrease your bond's present value _________
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increases
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equivalent taxable yield, why important and formula
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muni bonds are tax-exempt
interest yield/(1-investors marginal tax bracket) |
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rate of return equation
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(ending value -beginning value) +income return all over beginning value
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annualized rate of return equation
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(ending value-beginning value) + income return all over beginning value x 1/n
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liquidity risk
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risk when you can't liquidate security fast enough or at a fair market price
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market risk
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risk with overall market movements. bull market (all stocks move up) and bear markets (all move down)
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financial risk
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risk associated with companies use of debt, could default or stock drops in price
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systematic risk aka
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aka market-related or nondiversifiable risk, results from factors affecting all securities
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unsystematic risk aka
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aka firm-specific, company-unique, diversifiable risk
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constant growth model for stocks/company
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stock price= (next years earnings/profits)/(i-g)
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call
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right to buy 100 shares of something at a specific price in less than or = to 9 months, do if the price is going up
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put
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right to sell 100 shares of something at a specific price in less than or = to 9 months, do if you think prices are going down
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to short sell how much money do you need in your account
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half
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vested
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worked long enough for that company to receive pension benefits
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defined benefit plan
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burden on employer, you pay nothing into plan, non contributory retirement plan
usually: avg pay x number of years of work x .015 |
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defined contribution plan
example |
you pay into plan, often employer has a matching rate
401(k) (same as 403(b))- medium and large companies, can contribute %age of salary |
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When can you take your $ out of a 401k
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59.5 years no penalty BUT taxed at normal rates
required min. distribution- have to pull out certain $ by age 70.5 or penalized 50% |
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IRA
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individual retirement account (80s), limits are small (5k this year), penalties if you take out before 59.5, can have this and a 401(k)
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Roth IRA
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5k year, no required min distribution(can stay in forever), investment growth not taxed, can take out with no penalty for permanent disability or 1st home
can't have if you make over $120k, married no if you make over $176k |
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Simple IRA
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max $11,500 pre-tax income or 100% of income, for separate jobs
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Keogh Plann
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SEP/simplified employed pension, 25% of compensation limited up to $245k/year for self employed,
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section 72(t) plan
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desperation, if you don't want the 10% penalty for dipping b4 59.5, you can take out exactly $10,000 (or account value/life expectancy) ea year without penalty
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NAV
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net asset value = (total market value of all securities-liabilities)/total shares outstanding
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class A shares
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have front end load or fee paid
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class B shares
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back end load (commission paid when you leave, more risk, they can increase the management fee)
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open end fund
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issue as many shares as they need to (vs closed end fund)
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prospectus
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doc for potential investors, fees and managaer
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Aggressive growth fund
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small co. that grow fast (20-30%/year)
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Growth and Income fund
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buy growing companies and ones that pay dividends
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Balanced Fund
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don't have all money in the stock market
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Sector fund
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buy cos in the same sector, not diversified
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Index fund
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S & P 500, "the market" only pay tax when you leave market, representative of US economy
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Global mutual fund
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invest in any co. on earth, typically . 70% US companies
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Bond mutual fund
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bond diversification, muni/gov, corp bonds
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blue chip stock
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big, profitable stable, pays good dividends
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Growth stock
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co. growing rapidly, smaller, no dividends, use money extend co.
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Income stocks
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utilities, monopolies w increased gov regulation, pays most profit out as dividentds
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Small cap company
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new, supergrowth, can be speculative
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Cyclical company, vs.
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ride economy's cycle, FORD vs. Counter cyclical stock, fix cars
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defensive stock
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stuff that everyone has to have, regardless of the market
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Investment styles: 1 & 2
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Growth style- continue to buy as long as it looks good
Value Style- cheap, buy if less than they think it's worth |
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Fundamental analyst
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predict future sales, costs, profits, PV of future profits
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How much should one share cost
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PV of future sales divided by number of shares
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Price/Earnings ratio
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measure of a stocks relative value, = price per share/earnings per share
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Dividend yield ratio
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(dividend/share)/(price/share) = rate of return and d.y. ratio
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common stock
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primarily interested in capital gains
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preferred stock
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primarily interested in dividends
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