Basic InvestmentsCPCU 556 Personal Financial Planning

Donna M. Kesot, CPCU

Donna M. Kesot, CPCU, Copyright 2012 . All Rights Reserved, 4-11-2012

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Risks Investing 101

MiscellaneousMutual Funds

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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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