Chapter 1: Preparing to Invest Flashcards
Debt
A loan that obligates the borrower to make periodic interest payments and to repay the full amount of the loan by some future date.
Derivative Securities
Neither debt nor equity. Instead, they derive their value from an underlying security or asset. Stock options are an example.
Direct Investment
An investment in which an investor directly acquires a claim on a security. IE: buying a share of common stock
Domestic Investments
The debt, equity, and derivative securities that one can invest in the USA.
Equity
Represents ongoing ownership in a business or property. Most commonly common stock.
Financial institution
Are organizations, such as banks and insurance companies, that pool the savings of governments, businesses, and individuals and use those funds to make loans and to invest in securities such as short term bonds issued by the U.S government.
Financial Markets
Are markets in which suppliers and demanders of funds, trade financial assets, typically with the assistance of intermediaries such as securities brokers and dealers.
Foreign Investments
Investments direct or indirect that might offer more attractive returns than domestic investments.
Indirect investments
An investment in a collection of securities or properties managed by a professional investor.
Individual investors
Manage their own funds to achieve their financial goala
Institutional investors
Investment professionals who earn their living by managing other people’s money.
Long-term investments
Investments with longer maturities or, like common stock, with no set maturity at all.
Property
Consists of investments in real property or tangible personal property.
Returns
Come from two basic forms: income and increased value.
Risk
Reflects the uncertainty surrounding the return that a particular investment will generate.
