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Flashcards in Ch 12 Deck (35)
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0
Q

Efficient Market Hypothesis

A

The argument that stocks are always priced about right

1
Q

Savers

A

Households and businesses comprise the largest segment of this population

2
Q

Portfolio diversification

A

Practice of holding a large number of different stocks to reduce risk

3
Q

Securities exchange seat

A

Membership that is purchased to allow race in an equities market

4
Q

Organized exchanges

A

Places where buys and sellers meet to trade securities

5
Q

Over-the-counter market

A

An electronic marketplace

6
Q

Futures market

A

A place in which contracts for grain and livestock agreements are made in advance

7
Q

Option markets

A

Place in which a put or call can be purchased

8
Q

Financial system

A

The network that connects savers and borrowers

9
Q

Financial assets

A

A claim on the property and/or income of a borrower

10
Q

Borrowers

A

Government and businesses represent the larger portion of this population

11
Q

REIT’s

A

Company that makes loans to construction companies that’s build homes

12
Q

Financial intermediaries

A

Institutions that help being surplus funds of savers to borrowers

13
Q

Pensions

A

A payment received by somebody to provide income security after retirement

14
Q

Dow jones

A

Index that measures the performance of 30 stocks on the NYSE

15
Q

S&P

A

An index that measures the value of stocks on the NYSE, AMX, and OTC

16
Q

Bull market

A

A market in which the prices are constantly moving up

17
Q

Bear market

A

A situation in which the market prices have been moving down constantly

18
Q

Put

A

The right to sell a share of stock at a specific price at some time in the near future

19
Q

Call

A

The right to buy a share of stock at a specified price some time in the future

20
Q

Bond A: 7%, 10 year, $1,000 @ $1,050

Par value

A

$1,000

21
Q

Bond A: 7%, 10 year, $1,000 @ $1,050

Coupon

A

7%

22
Q

Bond A: 7%, 10 year, $1,000 @ $1,050

Maturity

A

10 years

23
Q

Bond A: 7%, 10 year, $1,000 @ $1,050

Coupon payment

A

Coupon payment=coupon(payment)

$70

24
Q

Bond A: 7%, 10 year, $1,000 @ $1,050

Current yield

A

Current yield=coupon payment/purchase price

6.67%

25
Q

T-bill a: 52 weeks, $20,000 @ $19,350

T-bill b: 26 weeks, $10,000 @ $9,600

T-bill c: 13 weeks, $30,000 @ $29,750

Discount of t-bill C?

A

$250

26
Q

T-bill a: 52 weeks, $20,000 @ $19,350

T-bill b: 26 weeks, $10,000 @ $9,600

T-bill c: 13 weeks, $30,000 @ $29,750

Discount of T-bill A?

A

$650

27
Q

T-bill a: 52 weeks, $20,000 @ $19,350

T-bill b: 26 weeks, $10,000 @ $9,600

T-bill c: 13 weeks, $30,000 @ $29,750

APR of T-bill B??

A

APR= discount/purchase pride x 1,2,4

(400/9600)x2= 8.33%

28
Q

T-bill a: 52 weeks, $20,000 @ $19,350

T-bill b: 26 weeks, $10,000 @ $9,600

T-bill c: 13 weeks, $30,000 @ $29,750

APR of T-bill A??

A

APR= discount/purchase pride x 1,2,4

(650/19,350)x1 = 3,36%

29
Q

T-bill a: 52 weeks, $20,000 @ $19,350

T-bill b: 26 weeks, $10,000 @ $9,600

T-bill c: 13 weeks, $30,000 @ $29,750

Maturity of T-bill C??

A

13 weeks

30
Q

List one investment commonly used to save for retirement

A

401 k plan

IRA

Pension

31
Q

Junk bonds

A

A bond that is rated lower than BBB, because of the rusty nature of the investment

32
Q

3 main components of a bond

A

Maturity, coupon, par value

33
Q

Types of non-banking financial intermediaries

A

Life insurance

Mutual fund

REIT

34
Q

Premium

A

An amount of money to be paid for insurance