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Investments > Chapter 5 > Flashcards

Chapter 5 Flashcards

1
Q

Financing for new, often high-risk ventures

A

Venture Capital (VC)

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2
Q

The market in which new securities are originally sold to investors

A

Primary Market

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3
Q

The market in which previously issued securities trade among investors

A

Secondary Market

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4
Q

Occurs when a company offers stock for sale to the public for the first time

A

Initial Public Offering (IPO)

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5
Q

The sale of additional shares of stock by a company whose shares are already publicly traded

A

Seasoned Equity Offering (SEO)

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6
Q

An issue of securities offered for sale to the general public on a cash basis

A

General Cash Offer

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7
Q

A public issue of securities in which securities are first offered to existing shareholders

A

Rights Offer

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8
Q

A firm specializing in arranging financing for companies

A

Investment Banking Firm

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9
Q

To assume the risk of buying newly issued securities from a company and reselling them to investors

A

Underwrite

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10
Q

Compensation to the underwriter, determined by the difference between the underwriter’s buying price and offering price

A

Underwriter Spread

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11
Q

A group of underwriters formed to share the risk and to help sell an issue

A

Syndicate

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12
Q

The type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares

A

Firm Commitment Underwriting

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13
Q

The type of underwriting in which the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility

A

Best Efforts Underwriting

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14
Q

The type of underwriting in which the offer price is set based on competitive bidding by investors

A

Dutch Auction Underwriting

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15
Q

Federal regulatory agency charged with enforcing US securities laws and regulations

A

Securities and Exchange Commission (SEC)

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16
Q

Document prepared as part of a security offering detailing a company’s financial position, its operations, and investment plans for the future

A

Prospectus

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17
Q

A preliminary prospectus not yet approved by the SEC

A

Red Herring

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18
Q

A trader who buys and sells securities from inventory

A

Dealer

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19
Q

An intermediary who arranges security transactions among investors

A

Broker

20
Q

The price a dealer is willing to pay

A

Bid Price

21
Q

The price at which a dealer is willing to sell

A

Ask Price

22
Q

The difference between the bid and ask prices

A

Spread

23
Q

Before 2006, the NYSE exchange members were the owners of the exchange

A

NYSE Exchange Member

24
Q

Having a license entitles the holder to buy and sell securities on the floor of the exchange

A

NYSE License Holder

25
Q

Formerly, sole dealers in a small number of securities on the floor of the NYSE

A

Specialists

26
Q

A chronological record of all limit, stop, and short-sale orders that had been placed with a specialist; also contained an inventory of the specialist’s holdings

A

Display Book

27
Q

A new class of market maker at the NYSE; replaced the role of specialists on the exchange floor

A

Designated Market Maker (DMM)

28
Q

A new class of market class of market maker at the NYSE; located off the floor of the exchange

A

Supplemental Liquidity Provider (SLP)

29
Q

Firms that execute customer orders to buy and sell stock transmitted to the exchange floor

A

Floor Brokers

30
Q

The new server-based electronic trading system at the NYSE

A

Super Display Book System (SDBK)

31
Q

The NYSE’s well-known, now defunct, electronic traing system

A

SuperDOT System

32
Q

All-electronic securities exchange listing stocks, options, and ETFs

A

Arca

33
Q

Fixed place on the exchange floor where the DMM operates

A

DMM’s post

34
Q

A customer order to buy or sell securities marked for immediate execution at the current market price

A

Market Order

35
Q

Customer order to buy or sell securities with a specified “limit” price

A

Limit Order

36
Q

Customer order to buy or sell securities when a preset “stop” price is reached

A

Stop Order

37
Q

All the methods used by stock exchanges during large sell-offs

A

Circuit Breakers

38
Q

Securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories

A

Over-the-Counter (OTC) Market

39
Q

A web site that allows investors to trade directly with each other

A

Electronic Communications Network (ECN)

40
Q

The highest bid quotes and the lowest ask quotes offered by dealers for a security

A

Inside Quotes

41
Q

Off-exchange market for securities listed on an organized exchange

A

Third Market

42
Q

Market for exchange-listed securities in which investors trade directly with other investors, usually through a computer network

A

Fourth Market

43
Q

Stock market index in which stocks are held in proportion to their share price

A

Price-Weighted Index

44
Q

Stock market index in which stocks are held in proportion to the aggregate market value of the companies in the index

A

Value-Weighted Index

45
Q

Condition that occurs when an index does not reflect all current price information because some of the stocks in the index have not traded recently

A

Index Staleness

Investments (10 decks)

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