Chapter One Terms

Question 1

Investment

Answer 1

Asset into which funds can be placed with the expectation that it will generate income

Question 2

Portfolio

Answer 2

Collection of different investments

Question 3

Returns

Answer 3

Rewards from investing (Income & Increased value)

Question 4

Securities

Answer 4

Investments issued by firms, governments, or other organizations that represent a financial claim on the resources of the issuer

Question 5

Liquidity

Answer 5

How quickly securities sell and convert to cash quickly without incurring substantial transaction costs and without having an adverse impact on the security’s price

Question 6

Property

Answer 6

Investments in real property or tangible personal property (land vs. objects)

Question 7

Direct Investment

Answer 7

Investor directly acquires a claim on a security or property

Question 8

Indirect Investment

Answer 8

Investment in a collection of securities or properties managed by a professional

Question 9

Debt

Answer 9

Loan that obligates the borrower to make periodic interest payments and to repay the full amount of the loan by some future date

Question 10

Equity

Answer 10

Ongoing ownership in a business or property

Question 11

Derivative securities

Answer 11

Derives value from an underlying security or asset, neither debt or equity

Question 12

Risk

Answer 12

Uncertainty surrounding the return that a particular investment will generate

Question 13

Diversification

Answer 13

Holding different types of assets in an investment portfolio

Question 14

Short-Term Investments

Answer 14

Investments that typically mature within one year

Question 15

Long-Term Investments

Answer 15

Investments with longer maturities or no maturity at all

Question 16

Domestic Investments

Answer 16

The debt, equity and derivative securities of Canadian based companies/governments

Question 17

Foreign Investments

Answer 17

The debt, equity and derivative securities of foreign based companies/governments

Question 18

Financial Institutions

Answer 18

Organizations that pool the resources of households and other savers and use those funds to make loans and to invest in securities

Question 19

Financial Markets

Answer 19

Markets in which suppliers and demanders of funds trade assets

Question 20

Individual Investors

Answer 20

Manage their own funds to achieve their financial goals

Question 21

Institutional Investors

Answer 21

Professionals that trade large volumes of securities for individuals, businesses and governments

Question 22

Common Stock

Answer 22

Equity investment that represents ownership in a corporation

Question 23

Dividends

Answer 23

Payments the corporation makes to its shareholders

Question 24

Capital Gains

Answer 24

When the stock price rises above an investor’s initial purchase price

Question 25

Fixed-Income Securities

Answer 25

Investments that offer a periodic cash payment that may be fixed in dollar terms or may vary according to a predetermined formula

Question 26

Bonds

Answer 26

Long-term debt instruments issued by corporations and governments

Question 27

Convertible Security

Answer 27

Fixed-income investment that permits the investor to convert it into a specified number of shares of common stock

Question 28

Preferred Stock

Answer 28

Ownership interest in a corporation and has no maturity date

Question 29

Mutual Fund

Answer 29

Portfolio of stocks, bonds, or other assets that were purchased with a pool of funds contributed by many different investors and are managed by an investment company

Question 30

Money Market Mutual Funds

Answer 30

Invest solely in short-term investments

Question 31

Exchange-Traded Funds

Answer 31

Portfolio of securities investors buy shares of on exchanges

Question 32

Hedge Funds

Answer 32

Investment funds that pool resources from many investors and invest in securities

Question 33

Options

Answer 33

Securities that give the investor an opportunity to sell or buy another security at a specified price over a given period of time

Question 34

Futures

Answer 34

Legally binding obligations stipulating that the seller of the futures contract will make delivery and the buyer of the contract will take delivery of an asset at some specified date and price agreed when sold

Question 35

Tax-Advantaged Investments

Answer 35

Provide higher after-tax returns by reducing the taxes investors must pay

Question 36

Real Estate

Answer 36

Assets such as residential homes, raw land and a variety of forms of income property

Question 37

Tangibles

Answer 37

Investment assets, other than real estate, that can be seen or touched

Question 38

Investment Goals

Answer 38

Financial objectives you wish to achieve by investing

Question 39

Capital Loss

Answer 39

When a capital asset is sold for less than its original purchase price

Question 40

Net Losses

Answer 40

The amount by which capital losses exceed capital gains

Question 41

Tax Planning

Answer 41

Looking at your earnings, both current and projected and developing strategies that will defer and minimize the level of taxes

Question 42

Discount Basis

Answer 42

Buy the security at a price below its redemption value, and the difference between what you pay to acquire the asset and what you receive is the interest earned