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Personal Financial Planning > Unit 12 > Flashcards

Unit 12 Flashcards

1
Q

An investment strategy where money is spread to many assets to reduce risk

A

Diversification

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2
Q

Deciding proportion of portfolio to invest each asset class

A

Asset Allocation

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3
Q

Comparing performance portfolio against established benchmark/index

A

Evaluating against a benchmark

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4
Q

Indicator shows average price movements for group of securities; tracks performance particular market segment

A

Index

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5
Q

30 very large company stocks

A

Dow Jones Industrial Average

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6
Q

500 largest US companies

A

S&P 500

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7
Q

Over the counter stocks, includes more small companies

A

NASDAQ

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8
Q

Identify investments and asset classes undervalued short run; make returns buying underpriced and selling overpriced

A

Active Investors/ Day Trading

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9
Q

Long term stock investing

A

Passive Investing

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10
Q

Prices adjust reflect publicly available info/ theory

A

Market Efficiency

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11
Q

Purchase proven stock and hold; for long term profit

A

Buy and hold

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12
Q

Funds mimic indexes

A

Indexing

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13
Q

Investors receive dividends as additional stock

A

Dividend reinvestment plan (DRIP)

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14
Q

Investor selects investments have cash flows

A

Maturity Matching

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15
Q

Business org exists legal entity separate 4rm owners

A

Corporation

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16
Q

Sell ownership 2 gain funds

A

Why issue stocks?

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17
Q

Common shareholders right: share firms assets and income after all other claim holders are paid

A

Residual Claim

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18
Q

Right vote members to board of directors

A

Voting Rights

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19
Q

Right corporate shareholders limits potential losses value of shares

A

Limited Liability

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20
Q

Right; shareholders maintain proportionate ownership when company issues additional shares of stock

A

Preemptive right

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21
Q

Shareholder gets # shared proportion number shares already held

A

Stock splits

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22
Q

Pays investors regular dividend

A

Income stock

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23
Q

Compensates investors through increased value 4 shares over time

A

Growth Stock

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24
Q

Large, stable, mature company stock

A

Blue Chip Stock

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25
Stock has above-average sensitivity 2 business cycle
Cyclical Stocks
26
Relatively insensitive to business cycle
Defensive Stocks
27
Measure risk of company’s stock
Beta
28
Value stock current market prices; calculated current market price times the number of sheared outstanding
Market Capitalization
29
Company profitability equal after-tax net income/ number of shares outstanding
Earnings Per Share (EPS)
30
Future earnings potential: market price/ (EPS)
Price to earnings (P/E) ratio
31
Long-term, interest bearing debt securities: help finance long-term assets/operations
Corporate Bonds
32
Interest exempt state local income tax.
U.S. Treasury Bonds
33
Interest exempt from federal tax
Municipal Bonds (Muni)
34
Interest principal backed by assets/future cash flows as collateral
Secured Bond
35
Interest payments adjusted according to current market
Floating-rate bond
36
Interest rate tied to market index
Indexed bond
37
U.S. government bonds w/ face value adjusted annually for inflation: investors earn inflation-adjusted rate of return
Treasury Inflation-Protected Securities
38
Medium-or-high-grade bond low risk default
Investment-grade bonds
39
Bond pays higher rate of return; has high risk default and lower liquidity
High yield/junk bond
40
Document summarizes financial information about stock or bond and the issuing company for potential investors
Prospectus
41
Person/entity manages assets on behalf of another
Trustee
42
Dollar amount bondholder receive at bonds maturity date
Face value
43
Date when bond comes due
Maturity Date
44
Annual rate of interest on bond: quoted as percentage of face value
Coupon Rate
45
Annual dollar amount paid in interest on bond, equal to coupon rate times face value
Coupon Payment
46
Term allows bond issuer buy back bond before maturity date
Call provision
47
Annualized return bond, held to maturity and all interest payments are reinvested at the same rates
Yield to maturity
48
Initial value assigned shares of preferred stock issuance used calculate dividend payment
Preferred stock per value
49
Constant cash flow
Perpetuity
50
Issuer has right to buy back shares. Company pay higher dividend rate
Callability
51
Holder receive past unpaid dividends before dividends paid common stock
Cumulative Preferred Stock
52
Dividend tied market interest rate
Adjustable-rate preferred stock
53
Convert preferred shares common shares under certain conditions
Convertibility
54
Stocks and bonds sold public for first time
Primary Market
55
Stocks bonds traded between investors
Secondary Market
56
First stock offering to the public
Initial Public Offering (IPO)
57
Physical place where securities traded
Securities Exchange
58
Electronic trading securities through securities dealers
Over-the-counter (OTC) market
59
Security approved bought or sold on particular exchange
Listed security
60
Price offered potential buyer
Bid price
61
Price requested seller
Ask price
62
Last price stock sold
Close price
63
Request buy stock price up to given maximum or sell stock at any price above a given minimum
Limit Order
64
Buy stock at market price
Market order
65
Buy sell shares of stock when market price reaches certain level
Stop order
66
Investor borrows stock from broker, sell stock, and later byes stock on the market to replace borrowed stock
Selling short
67
Borrowed funds from broker to purchase stock
Buying on margin
68
Brokerage firm holder of margin account add money to account to maintain required minimum
Margin call
69
Trading based on company information not available to public.
Insider trading

Personal Financial Planning (9 decks)

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