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Flashcards in Chapter 14 Quiz Deck (10)
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The proportional breakdown of cash and securities.

Cash and securities mix decision


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

Investment policy


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

Business risk


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


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


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

Agency problems


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


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

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


A group of investment banks



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

Market Breadth