Chapter 14 Quiz Flashcards Preview

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Flashcards in Chapter 14 Quiz Deck (10)
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1

The proportional breakdown of cash and securities.

Cash and securities mix decision

2

A policy that defines the company's posture toward risk and return and specifies how the policy should be implemented.

Investment policy

3

The possibility that the company will not be able to meet ongoing operating expenditures.

Business risk

4

The possibility that the company will be unable to cover financing-related expenditures such as lease payments, interest, principal repayment, and preferred stock dividends.

Financial risk

5

Risk that is relevant to diversified investors which is the degree of sensitivity of the company's stock returns to market-wide returns.

Systematic risk

6

The interest of the principals (stockholders) do not coincide with those of the agents (managers).

Agency problems

7

Specialized account in which financial institution hold securities, automatically reinvests interest and other investment-related cash receipts, transfers funds per corporate instructions, monitors issuers actions such as calls and refundings, and provides a monthly statement on all account transactions

Custody account

8

The investment manager must decide from among 6 options prior to investing.

1. Instruments
2. Issuers
3. Denominations
4. Maturities
5. Yields
6 Risks

9

A group of investment banks

Syndicate

10

Refers to the number and size of parties that are potential buys of the instruments.

Market Breadth