Chapter 12- The Global Capital Market Flashcards
take in depositors money and lend out money; make money with the interest rate spread of what they are lending and giving away
commercial banks
often the interest rates of banks is tied to something that floats like
Prime in the US (federal reserve lending rate) and Libor (London Interbank offering rate)
like matchmakers; match people and companies with people and companies that have money in order to help a deal go forward
investment banks
a global capital market versus a purely domestic capital market
there are way more people on the global scale who are willing to lend money and often times you can find a better lending rate; if just borrowing or investing domestically you are limiting the number of investors
a company that doesn’t pay dividends but grows at a high rate so the value of the stock increases
growth stocks
may also pay dividends but the growth of the stock is not as quick; a little more stable
value stocks
the ______ will be higher if you stay domestic in your investing and borrowing
cost of capital
don’t want all your money in one type of investment, company, or industry; need to spread it out
diversifying your portfolio; diversification
controlling _____ is very important when it comes to investing
volatility
ETF
exchange traded funds; like the DOW; you don’t have time to research and invest in one specific company
NASDAQ
US technology sector index
DOW
30 largest companies traded on the stock exchange
investing in the ETF for the DOW is
a very cheap way to diversify a portfolio
this new ability to trade internationally creates more volatility
hot money
individuals lending money to corporations or governments
bonds; the bond market
