fianzas 2

A fixed-income security pays

a fixed stream of income or a stream of income that is determined according to a specified formula for the life of the security.

money market secuirities

are short term. are highly marketable and are generally very low risk.

what happens to a price weighted divisor when stock splits in the index

it goes down

is a higher or lower exercise price more valuable for a call option ?

lower exercise is more value

What are money markets?

markets that trade debt securities or instruments with maturities of less than one year

Asset allocation refers to

the allocation of assets into broad asset classes.

Which of the following portfolio construction methods starts with asset allocation?

top-down

________ are, in essence, an insurance contract against the default of one or more borrowers.

Credit default swaps

The Sarbanes-Oxley Act

Federal legislation passed in 2002 that sets higher ethical standards for public corporations and accounting firms. Key provisions limit conflict-of-interest issues and require financial officers and CEOs to certify the validity of their financial statements.

Investment bankers perform the following role(s)?

Market new stock and bond issues for firms Provide advice to the firms as to market conditions, price, etc. Design securities with desirable properties

What is TIPS?

TIPS provide a constant stream of income in real (inflation-adjusted) dollars because their principal is adjusted in proportion to the Consumer Price Index.

Security selection refers to

choosing which securities to hold based on their valuation.

The value of a derivative security

depends on the value of the related security

Financial assets permit all of the following except

elimination of risk.

The sale of a mortgage portfolio by setting up mortgage pass-through securities is an example of

securitization.