Upgrade to remove ads
Investments 1 pt 2
Terms in this set (48)
The _____________ is set by Regulation T of the federal reserve, currently set at 50% meaning that at most, 50% of the purchase price may be borrowed from a broker
Initial Margin (IM)
The _____________ is set by the broker, if set at 30%, must maintain at least 30% of the total value before additional money must be added to account
Maintenance Margin (MM)
If maintenance margin ratio falls below set percent, will receive a __________ to bring the account back to the appropriate level
What two ways can a margin call be paid?
send cash, sell security
If buying on margin, the investor is expecting a _______ market
If short selling, the investor is expecting a _______ market
Buy stock in orders of 100's
Buy stock in orders of fractions of 100's such as 125
Instruct the broker to buy/sell at the prevailing price
Request to buy or sell at specific price or better
Request to buy or sell at a specific price or better
stop loss order
Pool the resources of small investors together by issuing shares to investors and invest the funds in financial securities
The main advantage of investment companies is ___________
___________ investors do worse than the market
4 out of 5
Pools of money invested in a portfolio with fixed life and little active management
Unit investment trusts
What are the two types of managed investment companies?
Open end, closed end
Outstanding shares change when new shares are sold and old shares are redeemed and always sell at NAV
open end investment company
Examples of an open end investment company would be?
No change in outstanding shares and may sell at premium or discount from NAV
closed end investment company
What is the price you pay for a share of an open end investment company?
Net Asset Value
What causes the NAV to change in open end investment companies?
fluctuation in shares outstanding, fluctuation in asset value
Investment companies that invest in real estate
Real Estate Investment Trusts
Unregulated mutual funds
Index funds that are traded like stocks
Exchange Traded Funds
How do you narrow down your choices of mutual funds?
Charged as an upfront sales commission, cannot exceed 8.5%
front end load
Charged as a commission when you redeem your securities
back end load
Cost to cover advisory fees and administration expenses
charges to cover brokerage commission, distribution and advertising costs
12 B-1 fees
What is considered a cheap mutual fund based on expense ratio?
True or False: Performance of a mutual fund has nothing to do with an expense ratio
True or False: A higher expense ratio typically means lower net performance
Study that showed that top performance funds in a 2-year period have a 62% chance to be top performance funds in the next two years
Goetzmann & Ibbotson (1994)
Study that showed it is a random chance for a top performance fund to repeat
An arbitrary period over which the investment is held or is expected to be held
The return over a holding period
holding period return
The ending/future price of an asset is based on ________ data
The actual return may be ______ or ________ the expected return
above or below
If given the standard deviation and asked for variance?
Square the standard deviation
If given the variance and asked for standard deviation?
Square root of variance
Expected return plus/minus the standard deviation creates a ________
True or False: Investors prefer to have a large standard deviation?
A complete portfolio contains a mixture of ______ and _______ assets
risky, risk free
True or False: The expected return of a complete portfolio, depends on the proportion invested in risky and risk free assets
True or False: The risk of a complete portfolio, depends on the proportion invested in risky and risk free assets
Shows the linear relationship between the expected return and risk of a complete portfolio and provides all possible combinations between risky and risk free assets
Capital Allocation Line (CAL)
True or False: When choosing between 2 investments, choose one with lower slope
The slope in a capital allocation line shows that for every 1 unit of additional risk, the ______________ increases by that amount
You might also like...
Liano Test 1
Investments Exam 2
Investment analysis test 4
Other sets by this creator
Policy practice test
policy ch. 10 & 11
policy ch. 8 & 9
policy ch. 7