Mid-term

Question 1

Investment

Answer 1

Put your money in an asset that generates value or a return

Question 2

Speculation

Answer 2

Don’t generate wealth or return, involve much higher level of risk in hope of high return

Question 3

Short-term

Answer 3

Within 1 year period

Question 4

Intermediate-term

Answer 4

Between 1 and 10 year period

Question 5

Long-term

Answer 5

More than 10 year period

Question 6

Lending investment

Answer 6

Saving accounts/ bonds
- Debt instruments issued by corporations and government

Question 7

Ownership investment

Answer 7

Preferred Stocks/ Common Stocks
- Ownership in a corporation along with income-producing real estate

Question 8

Saving accounts

Answer 8

pays you interest

Question 9

Bond

Answer 9

Return is generally fixed and known ahead of time

Question 10

Default

Answer 10

Failure to repay dept
- on a loan or security
- Can occur when borrower is unable to make timely payments
- Everyone can default when you fail to pay the debt on time

Question 11

Nominal Rate of Return

Answer 11

Rate of return earned on investment WITHOUT inflation

Question 12

Real Rate of Return

Answer 12

Nominal rate of return - inflation rate

Question 13

Diversification

Answer 13

MIx a wide variety of investments to reduce. minimize portfolio’s risk

Question 14

Portfolio

Answer 14

Combined holdings of all your investments

Question 15

Systematic Risk

Answer 15

Risk that CAN’T be elimintaed through diversification

Question 16

Unsystematic Risk

Answer 16

Risk that CAN be elimintaed through diversification

Question 17

Asset allocation

Answer 17

Investment term that deals with how money should be divided among stocks, bonds, and others.
- time dimension of investing
- NOT a one-time decision

Question 18

Efficient markets

Answer 18

The speed at which new information is reflected in prices

Question 19

Efficient market hypothesis (EMH)

Answer 19

Efficient market theory - a hypothesis that states that share prices reflect all information

Question 20

Dividend

Answer 20

Company’s distribution of profits to its stockholders
- Cash
- More company stocks

Question 21

Capital appreciation

Answer 21

An increase in the selling price of your share of stock
- Can’t benefit from this until you sell the stock

Question 22

EX-dividend date

Answer 22

The stock begins trading ‘Without dividend’ that is, if you buy it on/ after the ex-dividend rate, you don’t get the dividend for the year

Question 23

Payment Date

Answer 23

Corporation sends out dividend check to stockholders

Question 24

Proxy

Answer 24

• Legal aggreement to allow a designated party to vote for stockholder at meeting
• Gives your buddy the right to make a decision for you

Question 25

Proxy Fights

Answer 25

In financial distress or when management takeovers are threatened - Battle for proxy votes between rivalgroups/ shareholders who wants to take control of the company or aim it in new direction

Question 26

Stock repurchases

Answer 26

Buy back their own issued shares of common stocks - Consolidate ownership - Remaining sockholders owns larger proportion of the firm

Question 27

Bull market (Bullish)

Answer 27

The market price rises

Question 28

Bear market Bearish)

Answer 28

The market price are falling

Question 29

Blue chip stocks

Answer 29

Common stocks issued by LARGE, NATIONALLY known companies with sound financial histories of solid dividend and growth records

Question 30

Growth Stocks

Answer 30

Issued by companies that exhibited sales and earnings growth well ABOVE their industry average - Smaller comapnies - Newly Formed - Pay very low or no dividend

Question 31

Income stocks

Answer 31

More mature firms that pay relatively high dividens, with little increase in earnings - Most utilities companies - Don't experience much growth in earnings anymore

Question 32

Speculative stocks

Answer 32

More risk and variability, big potential to grow - Generally difficult to forecast with precision the direction of the issuing company's future profits

Question 33

Cyclical stocks

Answer 33

Earnings tend to move with the economic situation - Auto company - Steel company - Housing industry company

Question 34

Defensive stocks

Answer 34

Aren't nearly as affected by swings in the economy - Perform better during downturns - Tend not to be hurt by downturns - Insurance industry companies

Question 35

Technical Analysis

Answer 35

Focus on supply/demand - Charts, computer programs to identify price tends for stocks or market - Interpretation of charts and graph - Mathematical calculations of trading patterns all aimed at spotting trends/ directions for stock - Prive level like resistance/ support levels

Question 36

Fundamental analysis

Answer 36

Focus on fundamental determinats as future earnings, expected levels of interest rates, and the firm's risk