Investment Exam 1 Flashcards Preview

Investment Management > Investment Exam 1 > Flashcards

Flashcards in Investment Exam 1 Deck (90):
1

What is the act that called for stricter rules for bank capital, liquidity, and risk management? Increased transparency, limited trading strategies.

Dodd-Frank Reform Act

2

Assets used to produce goods and services (PPE, human capital, etc.)

Real Assets

3

Claims on real assets or real-asset income (stock, bonds, derivatives)

Financial Assets

4

What is the act in which Chief officers must sign off in finance statements to lower the level of risk, followed by scandals?

Sarbanes-Oxley Act 2002

5

Finding undervalued securities and using market time to beat the market and capture market discrepancies (inefficient markets)

Active Management

6

No attempt to find undervalued securities, no attempt to time the market, holding a diversified portfolio. (efficient markets)

Passive Management

7

Fixed Income securities
-money market instruments
-bonds

Debt

8

Common and Preferred Stock

Equity

9

Path dependent securities

Derivative securities

10

Fixed-income securities with maturities of 1 year or less; highly liquid; low risk

Money Market Instruments

11

Bond (fixed-income) markets, Equity Markets, Derivative

Capital Markets

12

Issued by the federal government, denomination of $100, commonly $10,000, Maturity 4,13,26,52 weeks, high liquidity, no default risk, discount interest, federal owed taxation, exempt from state and local

Treasury Bill

13

Issued by Depository Institutions, any denomination, $100,000+ marketable, Maturity varies, typically 14-day minimum, liquid if marketable, 3 months or less, First $100K (250K) insured, interest is add on, interest income fully taxable.

Certificates of Deposit (CDs)

14

Issued by large creditworthy corporations and financial institutions, minimum $100K denomination, maturity maximum 270 days, usually 1-2 months, liquid if marketable, 3 months or less, unsecured, rated, mostly high quality default risk, discount interest, interest income fully taxable, new--asset backed

Commercial Paper (CP)

15

Originate when a purchaser authorizes a bank to pay a seller for goods at a later date (time draft). It becomes contingent liability of the bank and a marketable security

Bankers' Acceptances

16

Dollar-denominated (time) deposits held outside U.S.- pay higher interest rate than U.S. deposits

Eurodollars

17

Short-term sales of securities with an agreement to repurchase the securities at higher price - most overnight - collateralized loan

Repurchase Agreements (RP)

18

Call money rate applies for investors buying stock on margin

Brokers' Call

19

Depository institutions must maintain deposits with Federal Reserve Bank

Federal Funds

20

Rate at which large banks in London lend to each other. - base rate for many loans and derivatives

LIBOR (London Interbank Offer Rate)

21

Money Market Instruments are _____ risk

low

22

Which Money Market Instruments use the Bank Discount Rate (360 days)?

Treasury Bills
Commercial Paper
Bankers' acceptances
Repurchase Agreements and reverse RPs

23

Which Money Market Instruments use the Bank Equivalent Yield (BEY- 365 days)?

Certificates of Deposits (CDs)
Eurodollars
Federal Funds

24

Residual claim (stockholders last in line of all those who have a claim on the assets and income of corporation) , limited liability (most shareholders can lose in event of failure of corporate in their original investment)

Common Stock

25

Fixed dividends, no voting power, priority over common, dividends paid are not tax deductible, but up to 70% dividends received from other corps. can be excluded from taxable income

Preferred Stock

26

Value-Weighted Indexes:

NYSE Composite
Nasdaq Composite
S&P 500
Wilshire 5000

27

Price-Weighted Indexes:

Dow Jones Industrial

28

New issue created/sold; issuer receives proceeds from sale

Primary Security Sales

29

Existing owner sells to another party

Secondary Security Sales

30

Buyers and sellers locate one another

Direct Search Markets

31

Third party assistance in locating buyer/seller

Brokered Markets

32

Third party acts as intermediate buyer or seller; Dealer inventory or limit order book

Dealer Markets

33

Brokers and dealers trade in one location; Electronic limit order book; trading is more or less continuous

Auction Markets

34

Execute immediately at the market price

Market order

35

Buy/Sell at specified better or "no worse than" price

Price-Contingent Order

36

the stock is to be sold if its price falls below a stipulated level

Stop-loss orders

37

the stock should be bought when its price rises above a limit

stop-buy orders

38

NYSE recently acquired the ECN ______

Archipelago

39

NASDAQ recently acquired the ECN______

Instinet

40

__% drop would stop trading the in Dow Jones Industrial Average for the day

30%

41

Circuit breakers will be imposed if the Dow Jones Industrial Average drops by a minimum of ___% by 2:30 pm.

10%

42

Initial margin requirements on stocks are set by

Federal Reserve

43

When matching orders from the public a specialist is required to use the

highest outstanding bid price and lowest outstanding ask price

44

most important dealer market in the U.S.

NASDAQ

45

most important auction market in the U.S.

NYSE

46

____ System enables exchanges to send orders directly to a specialist over computer lines

SUPERDOT

47

The fully automated trade-execution system installed on the NYSE is called

Direct Plus

48

The approximate dollar value of trades on the NYSE in 2008 was

$150 Billion

49

Congressional action directed the SEC to implement a national competitive securities market

Securities Act Amendments of 1975

50

Requires full disclosure of relevant information relating to the issue of new securities

Securities Act of 1933

51

The primary market where new security issues are offered to the public is a good example of

a brokered market

52

Thirteen week T-bill auctions are conducted

weekly

53

____ would not be included in the EAFE index

Canada

54

The German stock market is measured by which market index

DAX

55

A _____ gives its holder the right to buy an asset for a specific exercise price on or before a specified expiration date

Call option

56

A firm that has large securities holdings that wishes to raise money for a short length of time may be able to find the cheapest financing from

Repurchase Agreement

57

TIPS are

treasury bonds that protect investors from inflation

58

The purchase of a futures contract gives the buyer

the obligation to buy an item at a specified price

59

Which is most like a short-term collateralized loan

repurchase agreement

60

Which is used to back international sales of goods and services

banker's acceptance

61

an index computed from a simple average of returns is an

equal weighted index

62

invests in a portfolio that is fixed for life of the fund

unit investment trust

63

partnerships of investors with portfolios that are larger than most individual investors but are still too small to warrant managing on a separate basis

commingled funds

64

The NAV of _____ funds is fixed at $1 per share

Money Market Funds

65

Contingent deferred sales charge

Back-end load

66

Type of mutual fund that primarily engages in market timing

asset allocation fund

67

Management fees for open-end and closed-end funds, typically range between ___ & ____

.2% and 1.5%

68

Investors who wish to liquidate their holdings in a unit investment trust may

sell their shares back to the trustee at net asset value

69

Investors who wish to liquidate their holdings in a closed-end fund may

sell their shares on the open market

70

____ funds stand ready to redeem or issue shares at their net asset value

Open-end

71

Low load mutual funds have front-end loads of no more than

3%

72

Most real estate investment trusts (REITs) have a debt ratio of around

70%

73

. Mutual funds account for roughly ______ percent of investment company assets

90%

74

. Mutual funds that hold both equities and fixed-income securities in relatively stable proportions are called

balanced

75

The longer you plan on remaining in the fund you choose, the more likely you will prefer a fund with a _____ rather than a ______, everything else equal

front end load; 12b-1 fee

76

. In 2000, the SEC instituted new rules that require funds to disclose

the tax impact of portfolio turnover

77

A/an _____ is an example of an exchange-traded fund.

SPDR or spider

78

In the 1970 study, Malkiel found that mutual funds that do well in one period, have an approximately ________ chance of doing well in the subsequent ear period.

65%

79

The ratio of trading activity of a portfolio to the assets of the portfolio

portfolio turnover

80

About _________ of mutual fund assets are invested in no-load funds

65%

81

. From 1971 to 2007 the average return on the Wilshire 5000 index was _________ the return of the average mutual fund.

1% higher than

82

Usually most tax-efficient fund

ETFs

83

In a recent study, Malkiel finds that evidence of persistence in the performance of mutual funds, ______ in the 1980s.

virtually disappears

84

Net Wealth of the economy

sum of real assets

85

two steps of investment process

Asset allocation
security selection

86

4 Financial Market Participants

Firms
Households
Governments
Financial Intermediaries

87

consolidated default risk of loans onto one class of investor, dividend payment into tranches. Senior paid first, then junior.

Collateralized Debt Obligations

88

national wealth consists of

structures, equipment,inventories of goods, and land

89

Which of the following does not approximate the performance of a buy and hold portfolio strategy

Value weighted index

90

. If you thought prices of stock would be rising over the next few months you may wish to _______ on the stock

purchase a call option