Term
| What is a TWR and how is it used? |
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Definition
| A Time-Weighted Return is a performance that minimizes the impact of the investor flows to measure the performance of a money manager. The report is used to compare a money managers performance to an index or another money manager. |
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Term
| What is the formula for a TWR? |
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Definition
| (1+IRR1/100) x (1+IRR2/100) x (1+IRRX.../100) - 1 |
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Term
| What is an IRR and how is it used? |
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Definition
| An Internal Rate of Return is a performance report that takes into consideration the time and size of the investor flows. It is used to measure the performance of a portfolio. |
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Term
| What is the formula for an IRR? |
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Definition
| The profit or loss (includes Realized Gain, Unrealized Gain, Interest Payments, Dividends, and Accrued Interest, minus any incurred fees) divided by the average capital base (beginning value + total weighted contributions - total weighted withdrawals), multiplied by 100. |
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Term
| What is an SRR and how is it used? |
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Definition
| A Simple Rate of Return is a performance that measures the change in market value between two sets of time. It is used to compare index value when there has been no interference from investor. |
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Term
| What is the formula for an SSR? |
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Definition
| (End market value - beginning market value) divided by the beginning value, multiplied by 100. |
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Term
| What two corporate actions qualify as an exchange and how are they different? |
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Definition
| The two corporate actions are a merger and an acquisition. Generally, a merger is a mutual decision to join companies. An acquisition is typically a hostile takeover where a larger companies forces the hand of a smaller company to join. |
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Term
| What is a spin-off, and what happens to the shareholders shares after a spin-off? |
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Definition
| A spin-off is when a company separates a division of its business into its own company. After the spin-off occurs, the shareholder still holds the same amount of shares of the original company, but they are valued less. Additionally, they receive new shares of the newly formed company. The combined value will be equal to the value of the shares before the spin-off. |
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Term
| Name 5 corporate actions. |
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Definition
| Dividend offering, Stock dividend offering, spin-off, exchange, stock split. |
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Term
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Definition
| The percentage gained or lost in a specified period of time. |
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Term
| What are money market securities and what are their characteristics? |
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Definition
| They are bonds with a maturity date set less than 365 days away, and a low interest rate. |
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Term
| What is "yield" and how is it measured? |
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Definition
| Expected annual return, measured in percentage. |
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Term
| What is the formula for yield? |
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Definition
| Return, divided by investment, mulitplied by 100. |
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Term
| What is the difference between yield on cost and yield on price? |
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Definition
| Yield on cost is the expected annual return on an investment that has already been made. Yield on price is the expected annual return on a hypothetical investment, if it was made at that point in time. |
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Term
| What is "yield to maturity"? |
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Definition
| Expected annual return on a fixed income security, if it reaches it's maturity date. |
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Term
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Definition
| The expected annual return up to a potential call date. |
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Term
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Definition
| The same as "yield". The expected annual return. |
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Term
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Definition
| When a broker cannot find the available number of securities to match the number requested in the order. |
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Term
| What are the steps to affirmation & confirmation? |
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Definition
| Once the trade is complete, the broker will send an order confirmation to the client. The client will respond with share allocation info. The broker will verify the total number of allocated shares matches the total number of purchased shares. The client (if not the custodian) will also send share allocation and broker fee details to the custodian so they can prepare for the transaction with the broker.The custodian will verify that the information from the client and the broker match. |
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Term
| What is the DTCC and what do they do? How long does it usually take? |
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Definition
| The DTCC is a clearing corporation. They oversee and the ensure that the arrangements made in a trade are upheld by both trading parties. The clearing process usually takes 3 days. |
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Term
| What is a trade? Where do they occur? |
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Definition
| The exchange of a security for cash. They can occur at a primary or secondary market. Both are exchanges. |
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Term
| What are the three steps in the life of a trade? |
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Definition
| One, the investment decision. Two, order initiation. Three, order execution. |
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Term
| What might an investor consider when making the decision to purchase a security? |
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Definition
| Potential risk, return, or macroeconomic forecast. |
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Term
| What is the difference between a market order and a limit order? |
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Definition
| A market order is executed immediately at the current price. A limit order specifies a time range and price when the order should be executed. |
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Term
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Definition
| A security issued by a company or government. It is a debt, with an agreed upon interest rated paid over a period of time. |
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Term
| Name the components of a bond. |
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Definition
| The issuer (borrower), principal (face value), coupon rate (interest rate), issue date (dated date), coupon frequency (interest payment frequency), and maturity date. |
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Term
| What is the issue date of a bond? |
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Definition
| The date in which interest begins to accrue. |
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Term
| Can I bond end before the maturity date? How? |
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Definition
| Yes, it can end early by a call or a put. A call is when the issuer pays back the principal before the maturity date. A put is when the bondholder collects the principal before the maturity date. |
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Term
| What can affect the par value of a bond on the market? |
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Definition
| Changes in the markets interest rates. A change in credit score of the issuer. |
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Term
| If a bond sells @102, it is selling... |
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Definition
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Term
| If a bond is selling @97, it is selling... |
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Definition
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Term
| What is the market value of a bond? |
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Definition
| Face value multiplied by the current market price (percentage). |
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Term
| How are bond prices listed on the market? |
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Definition
| They are listed as a percentage of par price. |
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Term
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Definition
| A list of securities, used for a point of comparison. |
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Term
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Definition
| The date in which new investors will not receive a dividend. The ex-date is two days before the record date. |
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Term
| What does market capitalization mean? |
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Definition
| The total value of all shares made available, purchased or unpurchased. (Price of share x total issued shares.) |
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Term
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Definition
| A stock that pays dividends. |
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Term
| What is a dividend? Why does a company pay dividends? |
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Definition
| Dividend is a cash payout from a company to its shareholders when their business is doing well. They are paid by a dollar amount per share. Dividends are issued as an incentive to current shareholders and to encourage new investors. It indicates strength within the company. |
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Term
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Definition
| The date in which a company pays out their dividends to all shareholders on their books. |
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Term
| What happens to the price of a stock when it pays a dividend? Why? |
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Definition
| On the ex-date, the price of each share is reduced by the amount of the dividend paid out. This happens because the cash is now an asset of the shareholders, not the company. |
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Term
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Definition
| A stock that is currently undervalued in the market. It could be because of a scandal, or negative perception, but doesn't necessarily mean the value of the company is low. |
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Term
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Definition
| A growth stock is growing at a faster rate than other comparable stocks on the marker. |
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Term
| What happens when a bond is sold in between coupon dates? |
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Definition
| The purchaser must pay the seller the accrued interest along with the purchase amount. This will be made up when the purchaser receives the first coupon payment. |
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Term
| What is the difference between active management and passive management? |
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Definition
| Passive management mirrors an index. Active management uses the knowledge and experience of a money manager to look for the best investment opportunities. |
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Term
| What are three examples of pooled funds that are traded on the market? |
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Definition
| Unit Investment Funds, Closed-End Funds and Exchange Traded Funds. |
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