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S&I Spr Study Guide

Study Guide for Spring Teks Study Guide

moral hazard problem The idea that financial institutions may pursue high-risk opportunities in order to achieve high returns with the assumption that they will be bailed out if their strategies fail.
Exchange Rate Risk Risk type that says, the earnings remitted by foreign subsidiaries are reduced when the foreign currencies weaken against the parent firm’s home currency.
Credit Risk Risk type that says, many securities firms offer bridge loans and other types of credit to corporations. The securities firms are subject to the possibility that these corporations will default on their loans.
Interest Rate Risk Lower interest rates can encourage businesses or govt agencies to issue more bonds, which requires more underwriting activity by securities firms. The market values of bonds held as investments by securities firms increase as interest rates decline.
Market Risk Risk type that says, securities firms offer many services that are linked to stock market conditions.
Fair Disclosure A regulation that requires firms to disclose any significant information simultaneously to all market participants.
mortgage-backed securities The type of securities that Wall Street securities firm Bear Stearns suffered from major investment losses in 2008.
Real Estate Investment Trusts (REIT) A closed-end fund that invests in real estate or mortgages.
Private Equity Funds A types of fund that pools money provided by individual and institutional investors and buys majority stakes in a business.
Exchange-traded funds A type of fund that is designed to mimic particular stock indexes and are traded on a stock exchange just like stocks.
Venture Capital Funds A type of fund that uses money that they receive from wealthy individuals and some institutional investors to invest in companies.
Closed-End Funds A type of fund that issues shares and uses the proceeds to make investments in stocks or bonds representing a particular sector or country for their investors.
International and Global bond funds A type of bond mutual fund contains bonds issued by corporations or governments based in other countries.
High-yield bond funds A type of bond mutual fund is often referred to as “junk” bond funds and are issued by highly leveraged firms.
Tax-free funds A type of bond mutual fund contains municipal bonds.
Income funds A type of bond mutual fund is composed of bonds that offer periodic coupon payments and vary in exposure to risk.
Multi-Fund Funds Funds that invest in a portfolio of different mutual funds.
Specialty funds Funds that focus on a group of companies sharing a particular characteristic.
Index funds Funds that are composed of stocks that, in aggregate, are expected to move in line with a specific index.
Growth and income funds Funds that contain a unique combination of growth stocks, high-dividend stocks, and fixed-income bonds.
International and global funds Funds that were created to enable investors to invest in foreign securities without incurring excessive costs.
Capital appreciation funds Funds that are composed of stocks that have potential for very high growth but may also be unproven.
Growth funds Funds that are typically composed of stocks of companies that have not fully matured and are expected to grow at a higher-than average rate in the future.
12b-1 fees Fees that are controversial because many mutual funds do not clarify how they use the money received from the fees.
Mutual Funds Funds were expenses are passed to the shareholders.
open-end funds Funds that can sell shares to investors anytime; an example would be mutual funds
Character The borrower’s willingness to repay loans as measured by its payment history on the loan and credit report.
Capital The difference between the value of the borrower’s assets its liabilities.
Condition The circumstances that led to the need for funds.
Collateral The quality of the assets that back the loan.
Capacity The borrower’s ability to pay.
Problem banks Considered to be Banks with a composite CAMELS Rating of 4 or higher.
Sarbanes-Oxley Regulation enacted to ensure a transparent process for financial reporting.
$250,000 The amount of deposits insured per person by the FDIC.
Dual banking system A banking system that includes both a federal and state regulatory system; The US Banking System is also commonly referred to as this of system.
Revolving credit loan Type of loan that obligates the bank to offer up to some specified maximum amount of funds over a specified period of time.
Informal line of credit Type of loan that allows the business to borrow up to a specified amount within a specified period of time.
Term loans Type of business loan primarily to finance the purchase of fixed assets such as machinery.
Working capital loan Type of business loan designed to support ongoing business operations.
Money Market Account An instrument that does not specify a maturity.
Negotiable Certificate of Deposit An Instrument that typically has a short term maturity and a minimum deposit of $100,000.
Certificate of Deposit An Instrument that requires a specified minimum amount of funds to be deposited for a specified period of time.
Passbook Savings Account The traditional savings account that does not permit check writing.
Demand Deposit Account (DDA) Another name for a checking account.
Number of Banks Due to a Decrease in them there has been an increase in the concentration in the banking industry.
Argument against bank bail out States that when the federal government rescues a large bank, it sends a message to the banking industry that large banks will not be allowed to fail.
Ways funds are generated for shareholders Passing on any earned income as dividend payments to shareholders, distributing capital gains resulting from the sale of securities within the fund, and mutual fund share price appreciation.
Created by: mrstephens