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S&I Fall Teks Review

Securities and Investments Fall Teks Review

When would it be recommended that individuals refocus their goals from saving to investing? Once an appropriate amount of liquid assets are reached.
What are stocks? A share of ownership in a company.
What are dividends? The share of profits distributed in cash to stockholders.
What are mutual funds? When a company combines the funds of many different investors and then invests that money in a diversified portfolio of stocks and bonds.
What are bonds? A form of lending to a company or the government. They can be issued by Corporations, The US Treasury, and Government agencies.
What is investment risk? The possibility that an investment will fail to pay the expected return or fail to pay a return at all.
What is behavioral finance? It applies psychology to financial decision making.
What is a money market? A financial market that facilitates the flow of short-term funds.
What happens in a primary market? Funds are provided to the initial issuer of securities.
What are speculative investments? High risk investments that have potential for significant fluctuations in return over a short period of time.
What is the The Securities Act of 1933? Required complete disclosure of relevant financial information for publicly offered securities in the primary market.
What is Equity Securities? Securities such as common stock and preferred stock that represent ownership in a business. Example would be stock issued by a corporation.
What agency was established by the Securities Exchange Act of 1934? The Securities and Exchange Commission (SEC)
What is debit securities? Securities that represent debt incurred by the issuer.
What is liquidity? Ability to sell securities easily without loss of value.
How are bonds often described? A debt obligation with long-term maturities that are commonly issued by governments or corporations to obtain long-term funds.
When a bond sells below par it is called? Discount Bonds
When a bond sells above par it is called? Premium Bonds
When a bond sells at Par it is called? Par Bonds
Strong economic growth tends to generate what kind of pressure on interest rates? Upward
The present value of cash flows that will be generated by the bond is also known as The price of a bond
What is systemic risk? The spread of financial problems, among financial institutions and across financial markets, that could potentially cause a collapse in the entire financial system.
What is private equity? A business that is privately held and the owners cannot sell their shares to the public.
What are two reasons some business owners would want to go public? 1. They can obtain financing to support the firm's growth. 2. They can "cash out" by selling their original equity investment to others..
when a firm goes public, which market does it issue stock in exchange for cash? Primary
What is crowdfunding? The practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet.
Which market would allow investors to sell stock they previously purchased to investors? Secondary Market
What is preferred stock? Equity Interest in a firm that usually does not allow for significant voting rights.
What is undervalued stock? A stock that is selling at a price significantly below what is assumed to be its intrinsic value.
What is a stock prospectus? A formal legal document that is required by and filed with the Securities and Exchange Commission (SEC) that provides details about an investment offering for sale to the public.
What is a bull stock market? A financial market of a group of securities in which prices are rising or are expected to rise. In this market Initial Public Offerings (IPOs) tend to occur more frequently.
What was the result of the Sarbanes-Oxley Act (Sox Act) It placed more regulation on publicly traded companies and their auditors.
What is an over the counter market? A term used to refer to stocks that trade via a dealer network as opposed to being listed on an organized exchange.
What is a financial futures contract? Standardized agreement to deliver or receive a specified amount of a specified financial instrument at a specified price and date.
What is a Day Trader? Traders of financial futures contracts who close out their contracts the same day they initiate them in an attempt to capitalize on price movements during a single day.
What are speculators? Those who take positions to benefit from future price movements.
What is are limit orders? Order in which the trade is executed if the price is within the limit specified by the customer.
When would speculators consider purchasing S&P 500 index futures? When they expect the stock market to perform well before the settlement date.
When would someone consider selling S&P 500 index futures? When they expect the stock market to perform poorly before the settlement date.
Why would a Financial institutions commonly take a position in interest rate futures ? To create a short hedge, which represents the sell of a futures contract.
Why are financial futures traded? To speculate on prices of securities or to hedge existing exposure.
Who regulates the operations of financial futures exchanges? The Commodity Futures Trading Commission
On average who do IPOs of firms perform over a period of a year or longer. Poorly
When a firms goes public in which market does it issue stock in exchange for cash? The Primary Market
What are mortgages? Long-term debt obligations created to finance the purchase of real estate.
What type of organizations are typically not major investors in stocks? Commercial banks
What is a distinguishing factor about credit unions over other financial institutions? Credit unions are nonprofit
What is an example of a non depository financial institution? Mutual Fund
What is an example of a depository institution? Credit Union
Created by: mrstephens