CFP Investments Practice Questions with Answers

Margin Call- Loan amount / (1 - Maintenanc margin). Maintenance Margin Amount- Requred Equity - Actual equity. Required Equity = current stock price x MM. Actual Equity = current Stock price - total debt. Ranks Stocks- Value Line Ranks Mutual Funds- Morningstar Ex-Dividend date This is the make or break date for whether or not you will or won't receive the most recent dividend. If you buy stock on or after the ex-dividend date you will NOT receive the dividend. Ex-dividend date is 2 market days before date of record. Securities Act 1933 & 1934 "1933: Regulates issuance of new securities (primary market). Reqires new issues are accompanied with prospectus. 1934: Regulates secondary market and trading. Created SEC to enforce compliance. " money market securities "BECT. Bankers Acceptance: 9=month maturity or less. Eurodollars: foreign bank deposits Commercial Paper: short-term loans between corps. Maturities of 270 days or less and no registration with SEC required. Denominations of $100,000. sold at discount. T-bills: denominations of $1,000. maturies: 4, 13, 26, 52 weeks. " Investment Policy Statement. (RR TTLLU) Risk, Return, Taxes, Timeline, Liquidity, Legal., Unique circumstances. S&P 500 vs Dow Jones S&P 500 is value-weighted - it considers the market capitalization rate of individual stocks. Dow Jones is a simple price-weighted average. Financial Biases (BROACH) "1. Belief Perseverance - ignores new information, sticks to old news. 2. Regret Avoidance - i.e. sell winners too soon, hold losers too long. 3. Overconfidence - overestimate ability & knowledge. 4. Anchoring - holds on to old/first news. Can't be objective about news. 5. Cognitive Dissonance - memory of past is better than actual results. 6. Hindsight bias - ""predicting"" events that already occurred. " Coefficient of Variation Tells us the likelihood of actually getting a return close to the average return. ST.D / AVG return. Higher CV indicates riskier investment. CoVariance Measures the interactive risk between two securities.