MIE201 Chapter 19

Broker

A certified expert who is legally registered to buy and sell securities on behalf of individuals and institutional investors.

B. general obligation bond

A government issues a bond backed by its taxing power. This bond is called a​ ______. A. savings bond B. general obligation bond C. treasury bond D. municipal bond E. revenue bond

Bear Market

A market situation in which most stocks are decreasing in value.

Bull Market

A market situation in which most stocks are increasing in value.

Derivatives Market

A market that includes exchange trading (for futures and some options) and over the counter trading (for all other derivatives at least currently).

Net asset value(NAV)

A mutual fund's assets minus its liabilities; usually expressed as NAV per share.

Index

A statistical indicator of the rise and fall of a representative group of securities.

Market Order

A type of securities order that instructs the broker to buy or sell at the best price that can be negotiated at the moment.

Municipal Bonds

Bonds issued by states, cities, and various government agencies to fund public projects.

E. treasury bills

Bonds issued by the U.S. government that are repaid in less than 1 year are called​ _____. A. treasury notes B. Treasury bonds C. Treasury​ Inflation-Protected Securities D. savings bonds E. Treasury bills

Margin Trading

Borrowing money from brokers to buy stock, paying interest on the borrowed money and leaving the stock with the broker as collateral.

Investment Portfolios

Collections of Various types of investments.

Financial Futures

Contracts to buy or sell a financial instrument(such as stocks, Treasury bonds, and foreign currencies) for a set price at a future date.

Currency Futures

Contracts to buy or sell amounts of specified currency at some future date.

Commodities Futures

Contracts to buy or sell specific amounts of commodities for a set price at a future date.

Derivatives

Contracts whose value is derived from some other entity(usually an asset of some kind, but not necessarily); used to hedge against or speculate on risk.

Treasury Bonds

Debt securities issued by the federal government that are repaid more than 10 years after issuance.

Treasury Notes

Debt securities issued by the federal government that are repaid within 1 to 10 years after issuance.

Credit derivatives

Derivatives used to reduce a lenders exposure to credit risk.

Mutual Funds

Financial instruments that pool money from may investors to buy a diversified mix of stocks, bonds, or other securities.

D. over the counter

If a corporation has issued a stock that​ doesn't meet listing requirements of a particular​ exchange, how is the stock​ sold? A. On a regional exchange B. On an international exchange C. On the NASDAQ D. Over the counter E. On the NYSE

B. yield rate

If a purchaser buys a​ bond, the interest income received from the bond is referred to as the​ __________. A. face value B. yield rate C. duration rate D. credit quality E. coupon rate

E. they are downgraded

If a rating agency determines that a​ company's finances are​ deteriorating, what happens to the bonds issued by that​ company? A. They issue a call provision. B. The face value is changed. C. They are defaulted on. D. They become​ zero-coupon bonds. E. They are downgraded

E. market value

If a stock is selling for​ $52.50 per share on New York Stock​ Exchange, it refers to which of​ these? A. Intrinsic value B. Book value C. Par value D. Face value E. Market value

B. Target-date funds

If an investor wants to invest in a fund that ensures growth by a specific​ date, which type of fund might the investor​ consider? A. Balanced funds B. ​Target-date funds C. Socially responsible funds D. Bond funds E. Income funds

Capital gains

Increases in the value of a stock or other asset.

Yield

Interest income a purchaser receives from the bond.

Securities

Investments such as stocks, bonds, options, futures, and commodities.

Asset allocation

Management of a portfolio to balance potential return with an acceptable level of risk.

No-load funds

Mutual funds that do not charge loads

Index funds

Mutual funds that mirror the composition of a particular market or index.

Exchange-traded funds (ETFs)

Mutual funds whose shares are traded on public exchanges in the same way as stocks.

Stock Exchanges

Organizations that facilitate the buying and selling of stock.

Stock

Ownership of or equity in a company; a share of stock represents a specific portion of ownership

Stock split

The act of dividing a share into two or more shares and reducing the market value by the same ratio

C. face value

The amount of money a bond buyer is lending to the bond issuer is called​ what? A. Market value B. Maturity C. Face value D. Yield E. Coupon rate

Face Value

The amount of money or principal a bond buyer lends to a bond issuer; also known as par value or denomination

Expense ratio

The annual cost of owning a mutual fund, expressed as a percentage

Bond Market

The collective buying and selling of bonds; most bond trading is done er the counter, rather than in organized exchanges

Maturity date

The date on which the principle of a bond will be repaid in full.

Book value

The difference between the assets and liabilities as listed on the balance sheet.

Rate of Return

The gain(or loss) of an investment over time, expressed as a percentage.

E. yield

The interest income a buyer receives from the bond is called the​ ______. A. intrinsic value B. duration rate C. par value D. dividend E. yield

Price/earnings ratio

The market value per share divided by the earnings per share.

Market Value

The price at which the stock is actually selling in the stock market.

Option

The purchased right-but not the obligation-to buy or sell a specified number of shares of a stock at a predetermined price during a specified period.

Load

The sales commission charged when buying or selling a mutual fund.

Treasury Inflation-Protected Securities(TIPS)

Treasury issues in which the principal amount is ties to the Consumer Price Index to protect the buyer against the effects of inflation.

A. price/earning ratio

What is used to determine whether a stock is overvalued or​ undervalued? A. Price/earnings ratio B. Book value C. Market value D. Stock buyback rate E. Intrinsic value

D. splitting the stock

When the price of a stock is out of line with similar​ stocks, how can board members bring the price back in​ line? A. Adjusting book value B. Stock buyback C. Resetting par value D. Splitting the stock E. Dilution of the stock

C. Bear market

When the stock market has a​ long-term trend of falling​ prices, what type of market is said to be taking​ place? A. Asset allocation market B. Stop order C. Bear market D. Bull market E. Short selling

D. stock

When you own a part of or equity in a​ company, it refers to​ _____. A. ETFs B. mutual funds C. bonds D. stock E. Treasury bills

D. market order

When you tell your broker to buy a stock at the best price that can be negotiated at the​ moment, it is called a​ _____. A. credit order B. limit order C. stop order D. market order E. face value order

E. credit derivatives

Which of the following are used to lower a​ financier's exposure to credit​ risk? A. Financial futures B. Hedge funds C. Options D. Derivatives E. Credit derivatives

C. face value

Which of the following is also called par​ value? A. Book value B. Intrinsic value C. Face value D. Dividend value E. Market value

C. NASDAQ

Which of the following is the major competitor of the​ NYSE? A. Regional exchange B. Bond exchange C. NASDAQ D. Over the counter E. Money market

B. financial futures

Which of the following represents lawfully binding contracts to buy or sell a monetary instrument for a set price at some date in the​ future? A. Hedge funds B. Financial futures C. Options D. Credit derivatives E. Derivatives

B. preferred stock

Which of the following​ represent(s) a combination of common stock and corporate bonds​ characteristics? A. Treasury bonds B. Preferred stock C. Mutual fund D. ETFs E. Index funds

B. book value

​______ per share is the difference between what a company owns and what it owes as listed on the balance​ sheet, divided by the number of shares outstanding. A. Face value B. Book value C. Market value D. Intrinsic value E. Par value

A. capital gain

​__________ refers to the growth in the value of the stock price over time. A. Capital gain B. Hedging C. Derivatives D. Par value E. A dividend

Intrinsic Value

An estimate of what a company is actually worth, independent of book and market values.

Limit Order

An order that stipulates the highest or lowest price at which the customer is willing to trade securities.

Stop Order

An order to sell a stock when its price falls to a particular point, to limit an investor's losses.

Money market

An over the counter marketplace for short term debt instruments such as Treasury bills and commercial paper.

Short Selling

Selling stock borrowed from a broker with the intention of buying it back later at a lower price, repaying the broker, and keeping the profit.

Common Stock

Shares of ownership that include voting rights.

Preferred Stock

Shares of ownership without voting rights but with defined dividends.

Treasury Bills

Short-term debt securities issued by the federal government; also referred to as T-bills.

C. ETFs

Similar to​ stocks, which of these are traded on public​ exchanges? A. Treasury bonds B. Treasury bills C. ETFs D. Municipal bonds E. Treasury notes

Portfolio Diversification

Spreading investments across enough different vehicles to protect against significant declines in any one vehicle.