Exam 1 - Chapter 1 [Book] Flashcards
(37 cards)
Investment:
the current commitment
of money or other resources in the expectation of reaping future benefits.
Real assets:
the land, buildings, machines, and knowledge that can
be used to produce goods and services.
Financial assets:
such as stocks and bonds.
Fixed-income or debt securities :
promise either a fixed stream of
income or a stream of income determined by a specified formula.
What’s another name for Fixed-income
Debt securities
equity:
common stock, or equity, in a firm represents an ownership
share in the corporation.
derivative securities:
such as options and futures contracts provide payoffs that are determined by the prices of other assets such as bond or stock prices.
Stock prices reflect investors’ collective assessment
of a firm’s current performance and future prospects.
Virtually all real assets involve some ____
risk.
An investor’s portfolio is simply his collection of ______ _____
investment assets.
Asset allocation:
decision is the choice among these broad asset classes,
Security selection:
decision is the choice of which particular securities to hold within each asset class.
“Top-down” portfolio construction starts with ____ _____
asset allocation.
Security analysis:
involves the valuation of particular securities that might be included
in the portfolio.
Risk–return trade-off:
in the securities markets, with higher-risk assets priced to offer higher expected returns than lower-risk assets.
Passive management calls
for holding highly diversified portfolios without spending effort or other resources attempting to improve investment performance through security analysis.
Active management
is the attempt to improve performance either by identifying mispriced securities or by timing the performance of broad asset classes
Financial intermediaries:
have evolved to bring the suppliers of capital (investors) together with the demanders of capital (primarily corporations and the federal government).
Investment companies
which pool and manage the money of many investors, also arise out of economies of scale.
____ _____ that specialize in such activities can offer their services at a cost below that of maintaining an in-house security issuance division. In this role,
Investment bankers
What are Investment bankers also called?
Underwriters.
primary market, .
where new
issues of securities are offered to the public
The equity investment in these young companies is called _______ _____
venture capital (VC)
Securitization:
These pools, which were essentially claims on the underlying mortgages,
were soon dubbed mortgage-backed securities, and the process was called
