FIN 221 Exam 1
When interest rate goes down the present value goes __? - Answers-Up
What is an ordinary annuity? - Answers-a sequence of equal cash flows, occurring at the end of each
period
What is an annuity due? - Answers-a sequence of periodic cash flows occurring at the beginning of each
period
What is a future value? - Answers-the amount to which an investment will grow after earning interest
What is compound interest? - Answers-interest earned on interest
What is simple interest? - Answers-interest earned only on the original investment
What is a market? - Answers-a venue where goods and services are exchanged
What is a financial market? - Answers-a place where individuals and organizations wanting to borrow
funds are brought together with those having a surplus of funds
How is capital transferred between savers and borrowers? - Answers-direct transfers, investment
banking house, financial intermediaries (banks, insurance companies)
, What is a money market? - Answers-short-term obligations with less than 1 year to maturity (t-bills,
commercial paper)
What is a capital market? - Answers-long-term financial securities greater than 1 year (common and
preferred stock, bonds and notes)
What is the primary market? - Answers-market for newly issued financial securities (IPOs, cash to issuer)
What is the secondary market? - Answers-market for trading of "old" securities, money is exchanged
among investors
What is the spot market? - Answers-market for exchanging financial and other assets NOW
What is the futures market? - Answers-a price is agreed to today for a transaction that will be carried
out at some future date
What is a derivative? - Answers-a derivative security's value is derived from the price of another security
What are examples of different financial institutions? - Answers-commercial banks, insurance
companies, pension funds, mutual funds
What are specific financial markets? - Answers-NY stock exchange, NASDAQ, international stock
markets, US bond markets
What is weak-form efficiency? - Answers-can't profit by looking at past trends, highly efficient
What is semi strong-form efficiency? - Answers-all publicly available information is selected in stock
prices, so it doesn't pay to overanalyze annual reports
When interest rate goes down the present value goes __? - Answers-Up
What is an ordinary annuity? - Answers-a sequence of equal cash flows, occurring at the end of each
period
What is an annuity due? - Answers-a sequence of periodic cash flows occurring at the beginning of each
period
What is a future value? - Answers-the amount to which an investment will grow after earning interest
What is compound interest? - Answers-interest earned on interest
What is simple interest? - Answers-interest earned only on the original investment
What is a market? - Answers-a venue where goods and services are exchanged
What is a financial market? - Answers-a place where individuals and organizations wanting to borrow
funds are brought together with those having a surplus of funds
How is capital transferred between savers and borrowers? - Answers-direct transfers, investment
banking house, financial intermediaries (banks, insurance companies)
, What is a money market? - Answers-short-term obligations with less than 1 year to maturity (t-bills,
commercial paper)
What is a capital market? - Answers-long-term financial securities greater than 1 year (common and
preferred stock, bonds and notes)
What is the primary market? - Answers-market for newly issued financial securities (IPOs, cash to issuer)
What is the secondary market? - Answers-market for trading of "old" securities, money is exchanged
among investors
What is the spot market? - Answers-market for exchanging financial and other assets NOW
What is the futures market? - Answers-a price is agreed to today for a transaction that will be carried
out at some future date
What is a derivative? - Answers-a derivative security's value is derived from the price of another security
What are examples of different financial institutions? - Answers-commercial banks, insurance
companies, pension funds, mutual funds
What are specific financial markets? - Answers-NY stock exchange, NASDAQ, international stock
markets, US bond markets
What is weak-form efficiency? - Answers-can't profit by looking at past trends, highly efficient
What is semi strong-form efficiency? - Answers-all publicly available information is selected in stock
prices, so it doesn't pay to overanalyze annual reports
