Investment Risks and Returns: Rapid Fire
Chapters in this video
- 0:00 Systematic vs. nonsystematic risk and the PRIME risks
- 2:04 Zero-coupon bonds: maximum interest rate, zero reinvestment
- 2:55 Treasury and municipal tax treatment flip
- 3:20 Tax-equivalent yield and the AMT trap
- 4:05 Control relationships and 12b-1 fee ceilings
- 5:13 Breakpoint selling, soft dollars, and who authorizes holds
- 7:47 Return of capital, letter of intent, SAI, and the 5% policy
- 8:55 Rapid-fire exam recap
What this video covers
- How systematic risk differs from nonsystematic risk, which one diversification eliminates, and why beta measures only market risk
- The PRIME memory aid: purchasing power, reinvestment, interest rate, market, and exchange rate risks, and why diversification fails against every one
- Why zero-coupon bonds carry maximum interest-rate risk but zero reinvestment risk, and how this flips for high-coupon callable bonds
- How Treasury and municipal interest are taxed at opposite levels, when the tax-equivalent yield formula makes munis attractive, and why private activity bonds trigger the alternative minimum tax (AMT)
- What must be disclosed before or at the time of a transaction, the 12b-1 fee hard cap of 1.00%, and why breakpoint selling is a violation
- The temporary hold timeline for specified adults: 15 business days initially, 25 with extension, and up to 55 with state reporting, plus who may authorize it
- Why return of capital is not income, the 13-month letter of intent window, when the Statement of Additional Information (SAI) is delivered, and what the 5% policy actually covers
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