Exam 4: Investment Planning

What term is defined as the variability or uncertainly in a firm's operating income or earnings before interest and taxes?

Tom is looking at the morning's currency reports and notices that 1 Nigindia rupee equals 1.5 Vietbodian pounds. It also reads that 1 Vietbodian pound equals 2 Mexicali pesos, but 1 Nigindia rupee equals 4 Mexicali pesos. Tom wants to gain profits by employing an arbitrage strategy. Which of the following defines arbitrage strategy?

What concept states that the larger a sample population the more accurate the prediction acquired by the testing of the sample?

When are convertibles in double jeopardy?

Your client wants a hands-on approach to portfolio management since they have the tendency to anticipate the direction of economic conditions. What type of investment strategy does this client want to practice?

Your client wants to know which of his bonds are more volatile to changes in interest rates; what is the best technique to determine volatility of bonds?

Mary has $100,000 that she would like to invest in jumbo certificates of deposit (CD). She doesn't want her money tied-up to long, but she doesn't want to pay any penalties. How long must she wait for the CD to mature and to withdrawal without penalty?

Which of the following term(s) refer to the principal amount of the bond that the issuing corporation will pay the bondholders on the bond's maturity date?

Coupons are fixed periodic interest payments. They are paid from the bond's issue date to the bond's maturity date. What is the relationship between a bond's yield and its coupons?

What measure for investment returns computes the return for each period and takes the average of the results?

Prices are determined by supply and demand. Supply and demand are driven by rational and irrational behavior. Security prices move in trends that persist for long periods of time. The actual shift in supply and demand can be observed in market price behavior. Each of the above statements is assumptions of what type of analysis?

What type of stocks keep up with inflation or the general economy?

Not all investments are capitalized for earnings, what one/s is/are?

Which of the following is considered a distribution of a corporation's net income?

What concept has the shortcoming of assuming all cash flows are discounted at the same rate and are reinvested at the yield to maturity rate?

A diversified portfolio, market risk, and use of beta coefficient are associated with what type of performance measure?

Which of the following is true regarding asset allocation and portfolio diversification?

Your client as 20 years old and has several thousand dollars' worth of EE bonds that he was gifted on his first birthday. The client's EE bonds are hitting maturity and taxes will be due. The client is also starting college and funds to pay for school. What would you suggest the client do to address their financial dilemma?

In 1985, the Treasury introduced a zero coupon bond called STRIPS; they are direct obligations of the federal government. Your client is interested in investing a sum of funds that can grow tax-free and is concerned about bond volatility, what should you inform your client about STRIPS?