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Basic InvestmentsCPCU 556 Personal Financial Planning
Donna M. Kesot, CPCU
Donna M. Kesot, CPCU, Copyright 2012 . All Rights Reserved, 4-11-2012
100 100 100 100
Risks Investing 101
MiscellaneousMutual Funds
400400400
300 300 300
200 200 200200
300
400
C1 100 Question
The risk that an asset cannot be sold on short notice without incurring a loss
C1 100 Answer
What is liquidity risk?
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C1 200 Question
Name 4 investment risks
C1 200 Answer
What are: Inflation risk Financial risk Business risk Exchange Rate risk Interest Rate risk Market risk Specific/unsystematic risk Systematic risk?
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C1 300 Question
Specific risk or unsystematic risk
C1 300 AnswerWhat risk that arises from features that are unique to a particular risk?
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C1 400 Question
Risk that is common to all securities of the same general class and therefore cannot be eliminated by diversification
C1 400 AnswerWhat is systematic risk?
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C2 100 Question
Advantages of mutual funds
C2 100 Answer
What are diversification, professional management, convenience, and ready marketability?
Disadvantages are Cost of Intermediary Expense can vary Selection issue
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C2 200 Question
Mutual Fund Investment Co. Types (3)
C2 200 Answer
What are1. Face Amount Certificates2. Unit Investment Trusts mutual funds?3. Management Companies?
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For additional 400 points. Are these more or less secure than US Treasury issues?
C2 300 Question
The market value of a fund share
C2 300 Answer
What is Net Asset Value (NAV)?
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(Mutual fund net worth) ÷ (# of mutual fund shares outstanding)
C2 400 Question
Mutual Fund Types
C2 400 Answer
What are Open-ended Funds Closed-end Funds Load & No-Load Funds?
› Front end loads are funds where the investor pays a fee at purchase but not at redemption
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C3 100 Question
A large investment portfolio comprising many different securities—either stocks, bonds, or both—in addition to other investments
C3 100 Answer
What is a mutual fund?
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C3 200 Question
Index Fund
C3 200 Answer
A mutual that tracks the market rather than trying to outperform the market
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C3 300 Question
The practice of using borrowed money to invest
C3 300 Answer
What is leverage?
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C3 400 Question
Steps of an Investment Plan
C3 400 Answer
What are 1. Determine investment goals2. Estimate savings requirements and set priorities3. Determine acceptable level of investment risk4. ID investment alternatives5. Select the appropriate investment approach6. Monitor & review the investment plan?
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C4 100 Question
The profit a securities or capital investment usually, an annual percentage rate
C4 100 Answer
What is an investment return?
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C4 200 Question
Exchange Traded Fund
C4 200 Answer
What is a fund purchases assets and sells shares like a mutual but which can be traded like a stock because the shares represent proportional ownership
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C4 300 Question
Two Acts which regulates investment companies
C4 300 AnswerWhat are:Sale of shares1. Securities Act of 1933 2. Securities Exchange Ac t of 1934
Operations Company Act of 1940 (operations Investors Advisement Act of 1940
HomeDaily Double = 600 points What does SEC stand for?
C4 400 Question
Two ways to measure administrative performance of funds
C4 400 Answer
What are expense ratio and income ratio?
E/R = Total operating expenses ÷fund net assets I/R= Total operating expenses ÷ Fund Incomes Total operating expenses includes management
fees and expenses
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