ESSENTIALS OF INVESTMENTS CH.1-6
VOCAB: BODIE|KANE| MARCUS
QUESTIONS WITH CORRECT ANSWERS
2025
Investments - CORRECT ANSWER --
Commitment of current resources in the expectation of deriving greater resources in the future.
Real assets - CORRECT ANSWER -- Assets used to produce goods and services
Financial assets - CORRECT ANSWER -- Claims on real assets of the income generated by them
Equity - CORRECT ANSWER -- An ownershipSshare in a corporation
Derivative securities - correctSanswer--
Securities providing payoffs that depend on the values of other assets
Fixed income(debt) securities - CORRECT ANSWER --SPay a specified cash flow over a specific period
Agency problems - CORRECT ANSWER -- Conflicts of interest between managers and stockholders
Asset allocation - CORRECT ANSWER -- Allocation of an investment portfolio across broad asset classes
Security Selection - CORRECT ANSWER -- Choice of specific securities within each asset class
Security analysis - CORRECT ANSWER -- Analysis of the value of securities
Risk return trade off - CORRECT ANSWER -- Assets with higher expected returnsSentails greater risk
, Passive management -SCORRECT ANSWER --
buying and holding a diversified portfolio without attempting to identify mispriced securities
Active management - CORRECT ANSWER --
attempting to identify mispriced securities or to forecast broad market trends
Financial intermediaries -SCORRECT ANSWER --
Institutions that "connect" borrowers and lenders by accepting funds from lendersSand loaning funds to
borrowers
Investment companies - CORRECT ANSWER --
Firms managing funds for investors. An investment company may manageseveral mutual funds.
Investment Bankers - CORRECT ANSWER --
Firms specializing in the sale of new securities to the public, typically by underwriting the issues
Primary Market - CORRECT ANSWER -- a market in which new issues of securities are offered to the public
Secondary market - CORRECT ANSWER -- Previously issued securities are traded among investors
Venture capital - CORRECT ANSWER -- money invested to finance a new firm
Private equity - CORRECT ANSWER -- Investments in companies that are not traded on a stock exchange
Securitization - CORRECT ANSWER --
PoolingSloans into standardized securities backed by those loans, which can then be traded like any other
security
Systematic risk - correctSanswer--
Risk of breakdown in the financial system, particularly due to spillover effects from one market into other
s
VOCAB: BODIE|KANE| MARCUS
QUESTIONS WITH CORRECT ANSWERS
2025
Investments - CORRECT ANSWER --
Commitment of current resources in the expectation of deriving greater resources in the future.
Real assets - CORRECT ANSWER -- Assets used to produce goods and services
Financial assets - CORRECT ANSWER -- Claims on real assets of the income generated by them
Equity - CORRECT ANSWER -- An ownershipSshare in a corporation
Derivative securities - correctSanswer--
Securities providing payoffs that depend on the values of other assets
Fixed income(debt) securities - CORRECT ANSWER --SPay a specified cash flow over a specific period
Agency problems - CORRECT ANSWER -- Conflicts of interest between managers and stockholders
Asset allocation - CORRECT ANSWER -- Allocation of an investment portfolio across broad asset classes
Security Selection - CORRECT ANSWER -- Choice of specific securities within each asset class
Security analysis - CORRECT ANSWER -- Analysis of the value of securities
Risk return trade off - CORRECT ANSWER -- Assets with higher expected returnsSentails greater risk
, Passive management -SCORRECT ANSWER --
buying and holding a diversified portfolio without attempting to identify mispriced securities
Active management - CORRECT ANSWER --
attempting to identify mispriced securities or to forecast broad market trends
Financial intermediaries -SCORRECT ANSWER --
Institutions that "connect" borrowers and lenders by accepting funds from lendersSand loaning funds to
borrowers
Investment companies - CORRECT ANSWER --
Firms managing funds for investors. An investment company may manageseveral mutual funds.
Investment Bankers - CORRECT ANSWER --
Firms specializing in the sale of new securities to the public, typically by underwriting the issues
Primary Market - CORRECT ANSWER -- a market in which new issues of securities are offered to the public
Secondary market - CORRECT ANSWER -- Previously issued securities are traded among investors
Venture capital - CORRECT ANSWER -- money invested to finance a new firm
Private equity - CORRECT ANSWER -- Investments in companies that are not traded on a stock exchange
Securitization - CORRECT ANSWER --
PoolingSloans into standardized securities backed by those loans, which can then be traded like any other
security
Systematic risk - correctSanswer--
Risk of breakdown in the financial system, particularly due to spillover effects from one market into other
s
