FINANCE 355 - Chapter 1
Mutual fund
corporations that accept money from savers and then use these funds to buy stocks, long-term bonds, short term debt instruments issued by government or business units.
Exchange traded funds
investment built like a mutual fund but trades like individual stock.
Spot Market
markets in which assets are brought or sold for "on-the-spot" delivery.
Future market
markets in which participants agree today to buy or sell an asset at some future date
Private market
markets in which transactions are worked out directly between two parties
Primary market
markets where corporations raise capital by issuing new securities
Private equity company
similar to hedge funds, but rather than buy stocks of a firm, they buy and manage the entire firm
Hedge funds
similar to mutual funds, largely unregulated by the SEC
equilibrium
situation in which the actual market price equals the intrinsic value
Public market
Markets in which standardized contracts are traded on organized exchanges.
Money market
markets in which funds are borrowed or loaned for short periods
Financial services corporation
A firm that offers a wide range of financial services, including investment banking, brokerage operations, insurance, and commercial banking.
Over the counter market
A large collection of brokers and dealers connected electronically through telephones and computers, that provides for trading in unlisted securities.
Financial asset market
Consists of stocks, bonds and derivatives
Secondary market
Markets in which securities and other financial assets are traded among investors after they have been issued by corporations
Capital Market
Markets where interest rates, along with bond an stock prices are determined
Managements Primary Goal
Maximize the long run value of the firm's common stock while also being socially responsible
Investment bank
Underwrites and distributes new investment securities.
Pension fund
a fund set up by the employers for their employees.
Stock intrinsic value
estimation of the stocks "true" value
Corporate finance
focuses on decision relating to how much and what type of assets to acquire, how to raise the capital to purchase those assets, and how to run a firm to maximize value.
Dealer Market
includes all facilities that are needed to conduct security transactions not conducted on the physical location exchanges.
Broker market
need estate agent, do not need to maintain inventory, matches buyers and sellers.
Stock Market price
observable price in the market
Physical locations exchanges
tangible entities, formal organizations having tangible physical locations that conduct auction markets in designated securities.
Marginal tax rate
the tax rate applicable to the next dollar earned
Commercial bank
the traditional department store of finance serving for a variety of savers and borrowers.
Average tax rate
total taxes paid divided by taxable income
