Question | Answer |
Case | When return rates that are too good to be true are not true |
Buying negatively correlated stocks | You more equally distribute your risks in the market |
Buying positively correlated stocks | You are hedging for fast growth |
Applying probability | Use the bell shaped curve |
Why would you not buy stock with a beta of .1 | the value/growth of the stock is not going to go up and down (no equity growth) |
Unrelated stocks are correlated with this | unrelated goods |
What caused the 2001 recession | The .com crisis. Investors were ignoring profitability |
Why do we use weighted averaging | it's the best way to determine the risk of your existing stocks |
Peter Drucker | Invented the field of management |
Operating expenditures | less than twelve months |
Capital expenditures | More than twelve months |
General electric | reduced their dividends in 2009 |
What governmental activity causes capital flight | taxes on profits |
Cause of increase rates of underground activity | higher tax rates |
What industry doesn't have a business cycle | all industries have business cycles |
why do we have cycles | because it seems that humans have patterns of activity that are high and low cycles |
What is the top two concerns for real rate of return | 1. tax liability 2. inflation |
what harms the stock market the most | capital gains tax |
inflation premium | inflation goes up, everybody expects higher returns |
what single event contributed to the market increase of foreign direct investment (FDI) | Internet Technology |
No negational bares bonds | Las Vegas |
Crimea Crisis | Russian mob has a greater role in the banking industry |
If stock has a low beta why would you buy it | for the dividend income |
If you have a comparative advantage of a stock | The firm has natural advantages and assets in purchasing a stock |
buying stocks and behavioral activity | People are more motivated by fear of losses than by gains |
People most often when buying stocks do not consider this | mathematical analysis |
Most crucial in determining long term investments | Liability based on the payback period |
Everybody in the class will eventually earn $100,000 because | of the value of money and your age |
Why did the .com crash happen in 2000 | People forgot about profitability |
Liquidity premium | less liquid means higher return |
Standard deviation of the stock | helps define the volatility of the stock price |
Why are common stocks issued by companies | They get upfront capital stock, and it's short term |
Why buy preferred stock | You get a higher capital |
T Bills | Generate negative interest rate, made by the treasury |
Preemptive right in stocks | If more shares are issued you have the right to buy up in stocks to pertain your same percentage of the business |
Secured Debt | Debt attached to physical mean |
Stock with a higher beta | More volatile |
First thing you need to know when buying a stock | How the firm makes it's money |
Why would you pay 20% down on a house | Cuts into amortization schedule and less money goes towards the interest |
What tool has become popular | Computer Stimulation |
A sunk cost | when a past financial decision does not influence a future |
Stovepiping | You've invested too much and you're in too deep. Past money decisions that still influence the future. |
Why buy zero coupon bond | They are bought and sold for their face value |
Commercial Paper is considered valuable | 1. Financially verified 2. Often controlled taxability 3. less traceable tax wise |
Book value of a stock | deals with only explicit values |
Market value of a stock | deals with implicit values only (intellectual property rights) |
2032 baby boomers | buy t bills and CD's |
Two reasons for substantial underground activity | 1. Economy is highly taxed 2. Dysfunctional government |
When would you sell stocks in the short run | Higher beta coefficient stocks |
Symmetric information in the market | When the buyer and seller know the same information |
Asymmetric information in the market | The buyer or the seller knows more than the other |
Why is the FDI more crucial now than twenty years ago | There are many more places to put the money |
Competitive advantage | People working in the company are more highly skilled |
Callable feature | having a bond that is paying you, the company could call that bond and cash it in. High risk |
If we raise minimum wage to 13 dollars an hour what happens to those making 12 dollars an hour | Nothing happens to those making more and purchasing power goes down |
Affordable care act influenced jobs how | Fewer full time jobs created |
If the government has more bonds | There is pressure to raise taxes |
Every time minimum wage has increased | There has been inflation |
High Profit | You'll see more people coming into a market |
Bounded rationality | habitual/predictable decision making |
Outsourcing | When you move production overseas |
Subcontracting | Hiring people to work for you but they are not employees. Contractional employment |
Rational Ignorance | People willfully do not learn about information because they find it more efficient to not read the instructions |
Complimentary goods and stocks | Positively correlated |
Substitute goods and stocks | Negatively correlated |
If interest rates go up what happens | 1. It's harder to borrow money 2. inflation drops |
Russian Money Crisis | Russians were temporarily moving money and in out of the country |
Junk bonds | Very high risk, Very high return |
EE Series | Typical savings bond |
I-Bonds | Supposedly guaranteed to beat inflation |
Columbia examples of underground activity | 1/3 of the country isn't even controlled by columbia |
Denmark examples of underground activity | Heavily taxed, means more aversion, meaning more evasion |
Aversion | Taking action to avoid tax incidents |
Evasion | Illegal. Simply not reporting income |
Municipal bonds Advantage | Not federally taxed |
Municipal bonds Disadvantage | You may not get the return because municipality could go bankrupt |
Rational Ignorance | Buying something and not knowing why |