FIN3702 Test 1 [verified]
investment - CORRECT ANSWER-current commitment of money in expectation of receiving future
benefits
real assets - CORRECT ANSWER-land, buildings, equipment, knowledge used to produce goods and
services
financial assets - CORRECT ANSWER-stocks and bonds // claims on real assets
fixed-income (debt) securities - CORRECT ANSWER-pay a specified cash flow over a specific period
equity - CORRECT ANSWER-ownership share in a corporation
derivative securities - CORRECT ANSWER-securities whose value is derived from the value of other assets
agency problem - CORRECT ANSWER-the possibility of a conflict of interest between the stockholders
and management of a firm
asset allocation - CORRECT ANSWER-the process of spreading your assets among several different types
of investments to lessen the risk
security selection - CORRECT ANSWER-choice of specific securities within each asset class
risk-return trade-off - CORRECT ANSWER-higher-risk assets offer higher expected returns
passive management - CORRECT ANSWER-holding highly diversified portfolios without spending effort or
other resources attempting to improve investment performance through security analysis
active management - CORRECT ANSWER-attempting to identify mispriced securities or to forecast broad
market trends
, financial intermediaries - CORRECT ANSWER-institutions that "connect" borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers
primary market - CORRECT ANSWER-new issues of securities are offered to public
secondary market - CORRECT ANSWER-where investors trade previously issued securities with each
other
securitization - CORRECT ANSWER-the process of transforming loans or other financial assets into
securities
systematic risk (market risk) - CORRECT ANSWER-a risk that influences a large number of assets
yield to maturity - CORRECT ANSWER-the rate of return a bondholder will receive if the bond is held to
maturity
short sale - CORRECT ANSWER-investor borrows shares and immediately sells them, hoping he or she
can scoop them up later at a lower price, return them to the lender and pocket the difference
call - CORRECT ANSWER-right to buy
put - CORRECT ANSWER-right to sell at strike price
strike price - CORRECT ANSWER-The price at which the stock can be purchased (called) or sold (put)
during a specified period
holding period return - CORRECT ANSWER-rate of return over a given investment period
dividend yield - CORRECT ANSWER-% return from dividends
investment - CORRECT ANSWER-current commitment of money in expectation of receiving future
benefits
real assets - CORRECT ANSWER-land, buildings, equipment, knowledge used to produce goods and
services
financial assets - CORRECT ANSWER-stocks and bonds // claims on real assets
fixed-income (debt) securities - CORRECT ANSWER-pay a specified cash flow over a specific period
equity - CORRECT ANSWER-ownership share in a corporation
derivative securities - CORRECT ANSWER-securities whose value is derived from the value of other assets
agency problem - CORRECT ANSWER-the possibility of a conflict of interest between the stockholders
and management of a firm
asset allocation - CORRECT ANSWER-the process of spreading your assets among several different types
of investments to lessen the risk
security selection - CORRECT ANSWER-choice of specific securities within each asset class
risk-return trade-off - CORRECT ANSWER-higher-risk assets offer higher expected returns
passive management - CORRECT ANSWER-holding highly diversified portfolios without spending effort or
other resources attempting to improve investment performance through security analysis
active management - CORRECT ANSWER-attempting to identify mispriced securities or to forecast broad
market trends
, financial intermediaries - CORRECT ANSWER-institutions that "connect" borrowers and lenders by
accepting funds from lenders and loaning funds to borrowers
primary market - CORRECT ANSWER-new issues of securities are offered to public
secondary market - CORRECT ANSWER-where investors trade previously issued securities with each
other
securitization - CORRECT ANSWER-the process of transforming loans or other financial assets into
securities
systematic risk (market risk) - CORRECT ANSWER-a risk that influences a large number of assets
yield to maturity - CORRECT ANSWER-the rate of return a bondholder will receive if the bond is held to
maturity
short sale - CORRECT ANSWER-investor borrows shares and immediately sells them, hoping he or she
can scoop them up later at a lower price, return them to the lender and pocket the difference
call - CORRECT ANSWER-right to buy
put - CORRECT ANSWER-right to sell at strike price
strike price - CORRECT ANSWER-The price at which the stock can be purchased (called) or sold (put)
during a specified period
holding period return - CORRECT ANSWER-rate of return over a given investment period
dividend yield - CORRECT ANSWER-% return from dividends
