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Flashcards in Chapter 16 Deck (35)
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investor (16)

Individuals who purchase investments with current savings in anticipation of relatively stable growth on average or in the long term.


speculators (16)

Individuals who take relatively large risks hoping to earn quick, abnormal returns; they gamble on whether the prices of financial assets believed to be mispriced will be adjusted accordingly in the market


income securities (16)

investments, such as preferred stock and corporate bonds, that offer steady income in the form of dividends or interest payments


risk tolerance level (16)

an investor's ability and willingness to tolerate, or accept, risk.


transaction cost (16)

the costs associated with trading securities, which include the costs of time, effort, and telephone calls as well as any broker commissions incurred.


investment portfolio (16)

a combination of investment instruments


asset allocation (16)

the proportion of funds invested in various categories of assets, such as money market instruments, long-term debt, stocks, and real estate.


broker (16)

A middleman, or agent, who helps investors trade financial instruments such as stocks, bonds, and derivatives


full-service brokerage firm (16)

A brokerage firm that offers a variety of services to its clients, including research information, monthly publications that contain investment recommendations, advisory services, and so forth


round lots (16)

Multiples of 100 shares of a security


odd lots (16)

Number of shares that are not in multiples of 100


market order (16)

An order to execute a transaction at the best price available when the transaction reaches the market


stop order (16)

an order that specifies the price at which a market order is initiated


limit order (16)

an order to buy or sell a stock at no worse than a specified price


day order aka DO (16)

an instruction to cancel an order if the price conditions are not met by the end of the trading day


Good 'Til Cancelled aka GTC (16)

an instruction to keep an order active until the price limitation are met or until the investor cancels it


fill or kill order (16)

an instruction to cancel the order if it is not executed immediately


street name (16)

a situation in which stock is registered to the brokerage firm rather than the individual investor


stock symbol (16)

the trading initials of a company; the reference used by brokers when trades are made and price quotes are retrieved


holding period return aka HPR (16)

The return earned over the period of time that an investment is held, which might be six months, one year, or five years.


dividend yield (16)

The part of the total return associated with the dividends paid by the firm. It is computed by dividing the amount of dividends paid by the current stock price.


capital gain (16)

A change in the market value of a security


simple arithmetic average return (16)

a technique for computing the average return on an investment that sums each return and then divides by the number of returns; it does not consider compounding


geometric average return (16)

A technique for computing the average return on an investment that involves taking the nth root of the growth multiple and subtracting 1. It considers compounding.


market capitalism (16)

The total market value of a firm's stock, which can be computed by multiplying the number of shares outstanding by the market price per share


bull market (16)

A rising stock market


bear market (16)

A falling stock market


buy-and-hold strategy (16)

When investors purchase securities with the intention of holding them for a number of years


margin trading (16)

When an investor borrows from his or her broker some portion of the funds needed to purchase an investment


margin requirement (16)

the minimum percentage of the total purchase price that an investor must have to buy stock (or other investments) on margin