Finals Flashcards
(26 cards)
What is the purpose of studying financial markets?
To allocate capital efficiently and support economic growth.
What are the two main types of financial market structures?
Primary Markets and Secondary Markets.
What are the key features of money markets?
Short-term debt securities with maturity less than one year, low default risk, and high liquidity.
What is the difference between spot and forward transactions in foreign exchange markets?
Spot transactions involve immediate exchange, while forward transactions involve future exchange at a set rate.
What is common stock?
It represents ownership in a corporation, includes voting rights, and offers dividends.
What is the primary distinction between Treasury Bonds and Corporate Bonds?
Treasury Bonds are issued by governments with lower risk, while Corporate Bonds are issued by corporations with higher risk and return.
What are Treasury Bills (T-Bills)?
Short-term government obligations with maturities of 4, 13, 26, or 52 weeks, almost risk-free and highly liquid.
Define repurchase agreements (repos).
Short-term loans collateralized by securities, can mature overnight or have a longer term.
What are callable bonds?
Corporate bonds that can be repurchased by the issuer before maturity.
What is the formula to calculate bond price?
Bond Price = Present Value of Future Cash Flows (Coupons + Principal).
What is the purpose of stock market indexes?
To measure market performance, examples include DJIA and S&P 500.
What is FX Risk?
The risk that changes in currency value will affect cash flows.
What are the main types of mutual funds?
Equity Funds, Fixed-Income Funds, and Hybrid Funds.
How do hedge funds differ from mutual funds?
Hedge funds are high-risk, private investment pools that use aggressive strategies like short-selling or leverage.
Why is ethics important in investment?
Ethics build trust, ensure market integrity, encourage transparency, and reduce fraud.
What is the first step in the ethical decision-making framework?
Identify facts, stakeholders, and conflicts of interest.
What is the primary goal of mutual funds?
To pool resources from multiple investors to diversify investments and reduce risk.
What are equity funds, and what do they invest in?
Equity funds are a type of mutual fund that primarily invests in stocks.
What are fixed-income funds?
Mutual funds that invest in bonds and other debt instruments to provide regular income.
What strategies are commonly used by hedge funds?
Short-selling, leverage, arbitrage, and derivatives.
What is the difference between hedge funds and mutual funds in terms of regulation?
Hedge funds are less regulated, allowing for higher-risk strategies, while mutual funds are highly regulated.
What is the role of transparency in ethical investing?
Transparency builds trust, ensures informed decision-making, and reduces fraud.
What are the key principles in ethical decision-making?
Integrity, fairness, accountability, and respect for stakeholders.
How can conflicts of interest affect investment ethics?
They can lead to biased decisions that harm stakeholders and undermine trust.
