Investments Ch. 1-3, 28 (Bodie, Kane, Marcus) Exam Study Guide with Complete Solutions

Investments Ch. 1-3, 28 (Bodie, Kane, Marcus) Exam Study Guide with Complete Solutions Investments - Answer️️ -- Commitment of current resources in the expectation of deriving greater resources in the future. Real assets - Answer️️ -- Assets used to produce goods and services Financial assets - Answer️️ -- Claims on real assets of the income generated by them Equity - Answer️️ -- An ownership share in a corporation Derivative securities - Answer️️ -- Securities providing payoffs that depend on the values of other assets Fixed income (debt) securities - Answer️️ -- Pay a specified cash flow over a specific period Agency problems - Answer️️ -- Conflicts of interest between managers and stockholders Asset allocation - Answer️️ -- Allocation of an investment portfolio across broad asset classes Security Selection - Answer️️ -- Choice of specific securities within each asset class Security analysis - Answer️️ -- Analysis of the value of securities ©SOPHIABENNET@2024/2025 Tuesday, August 20, 2024 10:21 AM 2 Risk return trade off - Answer️️ -- Assets with higher expected returns entails greater risk Passive management - Answer️️ -- buying and holding a diversified portfolio without attempting to identify mispriced securities Active management - Answer️️ -- attempting to identify mispriced securities or to forecast broad market trends Financial intermediaries - Answer️️ -- Institutions that "connect" borrowers and lenders by accepting funds from lenders and loaning funds to borrowers Investment companies - Answer️️ -- Firms managing funds for investors. An investment company may manageseveral mutual funds. Investment Bankers - Answer️️ -- Firms specializing in the sale of new securities to the public, typically by underwriting the issues Primary Market - Answer️️ -- a market in which new issues of securities are offered to the public Secondary market - Answer️️ -- Previously issued securities are traded among investors Venture capital - Answer️️ -- money invested to finance a new firm Private equity - Answer️️ -- Investments in companies that are not traded on a stock exchange ©SOPHIABENNET@2024/2025 Tuesday, August 20, 2024 10:21 AM 3 Securitization - Answer️️ -- Pooling loans into standardized securities backed by those loans, which can then be traded like any other security Systematic risk - Answer️️ -- Risk of breakdown in the financial system, particularly due to spillover effects from one market into others Money markets - Answer️️ -- include short-term, highly liquid, and relatively low-risk debt instruments Treasury Bills - Answer️️ -- short-term government securities issued at a discount from face value and returning the face amount at maturity Certificate of deposit - Answer️️ -- a bank time deposit Commercial paper - Answer️️ -- Short-term unsecured debt issued by large corporations Bankers acceptance - Answer️️ -- An order to a bank by a