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BUSINESS FINANCE > BF-M6 > Flashcards

BF-M6 Flashcards

INTRODUCTION TO INVESTMENT

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1
Q

An _____ is an asset or item that purchased with the hope that it will generate income or will appreciate in the future.

A

investment

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2
Q

In finance, it is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.

A

investment

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3
Q

The act committing money or capital to an endeavor with
the expectation of obtaining an additional income or profit

A

INVESTING

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4
Q

5 DIFFERENT TYPES OF INVESTMENT

A
  1. BONDS
  2. STOCKS
  3. MUTUAL FUNDS
  4. MONEY MARKET ACCOUNT
  5. EXCHANGE TRADED FUND
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5
Q

A debt instrument, a bond is essentially a loan that you are giving to the government or an institution in exchange for a pre-set interest rate paid regularly for a specified term.

A

BONDS

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6
Q

A type of investment that gives you partial ownership of a
publicly traded company.

A

STOCKS

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7
Q

An investment vehicle that allows you to invest your
money in a professionally-managed portfolio of asset that, depending on the specific fund, could contain a variety of stocks, bonds, market related indexes, and other investment opportunities

A

MUTUAL FUNDS

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8
Q

A type of savings account that offers a competitive rate of interest (real rate) in exchange for larger than normal deposits

A

MONEY MARKET ACCOUNT

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9
Q

are funds sometimes referred to as baskets or portfolios of securities that trade like stocks on an exchange.

A

EXCHANGE TRADED FUND

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10
Q

When you purchase an ___, you are purchasing shares of the overall fund rather than actual shares of the individual underlying investments.

A

ETF

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11
Q

3 INVESTMENT STRATEGIES

A
  1. ALLOCATION OF FUND
  2. DIVERSIFICATION
  3. DOLLAR/PESO COST AVERAGING
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12
Q

Also known as asset allocation, this term refers to the types of investments / asset categories you own and the percentage of each you have in your investment portfolio

A

ALLOCATION OF FUND

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13
Q

This is a risk management technique that mixes a wide variety of investments to potentially minimize your investment risk.

A

DIVERSIFICATION

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14
Q

An investment strategy used whereby an investor purchase fixed investment amounts at predetermined times, regardless of the price of the investment

A

DOLLAR/PESO COST AVERAGING

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15
Q

A long-term asset such as land or a building that is not
purchased or sold in the normal course of business.

A

CAPITAL ASSETS

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16
Q

Profit or loss from the sale of an asset.

A

CAPITAL GAIN OR LOSS

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17
Q

The amount by which the value
of an asset increases or decreases compared to the amount you paid for it. You receive the capital gain or loss when you sell the asset.

A

CAPITAL APPRECIATION/DEPRECIATION

18
Q

A distributions of a portion of a company’s earnings,
decided by the board of directors, toa class of its shareholders.

A

DIVIDENDS

19
Q

A portfolio of securities representing a particular market or industry or a portion of it. Indices often serve as benchmarks for measuring investment performance.

A

INDEX

20
Q

An account that allows you to borrow money from your
brokerages account to purchase securities. The loan is collateralized by the existing
securities and cash held in the account.

A

MARGIN ACCOUNT

21
Q

A document filed with the SEC that describes an offering of securities for sale to the public. The prospectus fully discloses the risk, policies, and fees of
the offering.

A

PROSPECTUS

22
Q

The income return on an investment. This refers to the interest or dividend received from a security based on the investments cost or face value

A

YIELD

23
Q

9 TYPES OF INVESTMENT RISK

A
  1. MARKET RISK
  2. LIQUIDITY RISK
  3. CONCENTRATION RISK
  4. CREDIT RISK
  5. REINVESTMENT RISK
  6. INFLATION RISK
  7. HORIZON RISK
  8. LONGETIVITY RISK
  9. FOREIGN INVESTMENT RISK
24
Q

These risk of investments declining in value because of
economics developments of other events that affects the entire market.

A

MARKET RISK

25
Q

The main types of market risk are:

A

equity risk, interest rate risk and currency risk.

26
Q

applies to an investment in shares. The market price of
shares varies all the time depending on demand and supply.

A

EQUITY RISK

27
Q

applies to debt investments such as bonds. It is the risk of losing money because of a change in the interest rate.

A

INTEREST RATE RISK

28
Q

Applies when you own foreign investments. It is the risk of losing money because of a movement in the exchange rate

A

CURRENCY RISK

29
Q

The risk of being unable to sell your investment at a fair price and get your money out when you want to. To sell the investment, you may need to accept a lower price. In some cases, such as exempt market investments, it may not be possible to sell the investment at all.

A

LIQUIDITY RISK

30
Q

The risk of loss because your money is concentrated in 1
investment or type of investments. When you diversify your investment, you spread the risk over different types of investments industries and geographic locations.

A

CONCENTRATION RISK

31
Q

The risk that the government entity or company that issued the bond will run into financial difficulties and won’t be able to pay the interest or repay the principal at maturity.

A

CREDIT RISK

32
Q

applies to debt investments such as bonds.

A

Credit risk

33
Q

The risk of loss from reinvesting principal or income at a lower
interest rate

A

REINVESTMENT RISK

34
Q

The risk of a loss in your purchasing power because the value of your investments does not keep up with inflation.

A

INFLATION RISK

35
Q

is particularly relevant if you own cash or debt investments like bond.

A

Inflation risk

36
Q

_____erodes the purchasing power of money over time- the same amount of money will buy fewer goods and services.

A

Inflation

37
Q

These risk that your investment horizon may be shortened because of an unforeseen event, for example the loss of your job.

A

HORIZON RISK

38
Q

The risk of outliving your savings. The risk is particularly relevant for people who are retired or are nearing retirement.

A

LONGETIVITY RISK

39
Q

The risk of loss when investing in foreign countries. When you
buy foreign investments, for example, the shares of companies in emerging markets, for example the risk of nationalization

A

FOREIGN INVESTMENT RISK

40
Q

This may force you to sell investments that you were expecting to hold for the long term. If you must sell at a time when the markets are down, you may lose money.

A

HORIZON RISK

BUSINESS FINANCE (5 decks)

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