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.