Chapter 8 - Financial Institutions Flashcards
Gross Spread
the difference between the underwriting price received by the issuing company and the actual price offered to the public
Default Risk
the risk that companies or individuals will be unable to pay the contractual interest or principal on their debt obligation
Economies of Scale
the increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods
Annuity
a series of fixed payments paid at regular intervals over the specified period of the annuity. The fixed payments are received after a period of investments that are made into the annuity
Annuity (online)
a fixed sum of money paid to an individual each year; a form of insurance or investment entitling the investor to a series of annual sums
Primary Security
newly issued securities in which the firm receives money for the issuance
Secondary Security
a secondary offering of seasoned stock that has already been on the primary market. In this transaction, the stock is exchanged by investors and the company does not receive any cash for these transactions
Underwriting
the group of firms in an underwriting syndicate who sold the largest amount of the issue
Underwriting (online)
The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt)
Mutual Fund
a security that gives small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Shares are issued and can be redeemed as needed
Equity Fund
mutual fund composed of equities. This fund is more risky than a bond fund
Bond Fund
mutual fund whose investment objective is to provide stable income while etching on minimal risk
