Chapter 2 - Assets Classes & Financial Instruments Flashcards
In financial markets, what are the the two traditional types?
Money markets & Capital markets
What are the 4 major classes of Financial Assets or Securities?
- Debt (fixed-income securities)
- Common Stocks
- Preferred Stocks
- Derivatives
what financial market is short-term, marketable, liquid, low-risk debt securities?
Money Market Securities
what financial market is longer-term and riskier securities, diverse?
Capital markets
Longer-term debt, equity, and derivative markets are 3 segments of what market?
capital market
Treasury bills Certificates of deposit Commercial paper Banker's Acceptances Repos Brokers' Call Federal funds
all of these are what type of financial market?
money market
what market consists of Bonds, Equity, and Derivatives?
capital market
What money market security is the simplest, highly liquid, exempt from state/local taxes (except federal level), and issued by government?
Treasury Bill or “T-bill”
_____is the price paid to BUY a T-bill from a dealer.
ask price (p.27)
_____ slightly lower price received if SELL a T-bill to a dealer.
bid price (p.27)
_____difference in ask/bid prices, also dealer’s profit.
bid-ask spread (p.27)
= face value x [1 - (r(n/360) / 100)]
bank-discount method formula
Step 1 - [r x (n/360)]
Step 2 - [step 1 / 100]
Step 3 - [1 - step 2]
Step 4 - [step 2 x face value of bond]
true or false. Bid (sell) price will always be higher than Ask (buy) price?
False. Ask is always higher than bid.
[(face value / actual paid now) - 1] x (365/n) = ???
Annualized Yield rate (bank-discount method)
*note the 365 days instead of 360.
annualized yield rate is also called ______ in T-bill’s?
bond-equivalent yield