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S&I Fall Teks Review
| Question | Answer |
|---|---|
| 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
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