Everything Flashcards

1
Q

Capital Budgeting

A

the planning process used to determine whether an organization’s long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm’s capitalization structure

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2
Q

Interest Only Loan

A

the borrower will pay the interest every period, but none of the principal will be repaid until the end of the loan

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3
Q

Coupon (Bonds)

A

The stated interest payment

made on a bond.

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4
Q

face value or par value

A

The principal amount of a
bond that is repaid at the
end of the term. Also called
par value .

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5
Q

coupon rate

A

The annual coupon divided

by the face value of a bond.

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6
Q

maturity

A

The specified date on
which the principal amount
of a bond is paid

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7
Q

yield to maturity

A

The interest rate required in the

market on a bond.

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8
Q

Interest Rate Risk: All other things being equal, the longer the time to maturity

A

the greater the interest

rate risk

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9
Q

All other things being equal, the lower the coupon rate

A

the greater the interest rate risk

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10
Q

indenture

A
The written agreement
between the corporation
and the lender detailing the
terms of the debt issue.
Secure bonds becuz there is collateral (car/house) given by browerer if he defaults
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11
Q

debenture

A

An unsecured debt, usually
with a maturity of 10 years
or more.

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12
Q

sinking fund

A

An account managed by
the bond trustee for early
bond redemption.

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13
Q

call provision

A
An agreement giving the
corporation the option
to repurchase a bond at
a specified price prior to
maturity.
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14
Q

call premium

A

Generally, the call price is above the bond’s stated value (that is, the par value). The difference
between the call price and the stated value is the call premium

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15
Q

Real interest rate

A

Interest rates or rates of
return that have been
adjusted for infl ation.

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16
Q

nominal rates

A

Interest rates or rates of
return that have not been
adjusted for infl ation.

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17
Q

Call options

A

https://www.youtube.com/watch?v=EfmTWu2yn5Q

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18
Q

Common Stock

A

right to vote for board of directors and get dividends; first people to buy shares if more are issued

19
Q

Preferred stock

A

stocks that given owners the preference in how they get paid through dividends.

i. These stocks could be callable, meaning stockholder is required to sell their shares back to corporation
ii. Can be converted to common stock but not other way around
iii. Cumulative meaning if dividend is not paid it gets added up.

20
Q

Bond

A

a corporate certificate indicating that an investor has lent money to a firm or govt

21
Q

US govt bond

A

safe investment and so have low interest rate

22
Q

Bull market

A

overall stock prices are going to rise

23
Q

Bear market

A

when stock prices drop

24
Q

Capital gains

A

the positive difference between the price at which you brought a stock and what you sell it for

25
Q

Blue- chip stocks

A

Stocks issued by higher quality companies like Coca-cola, JJ, and IBM

26
Q

Growth stocks

A

stocks of corp in emerging fields such as technology are expected to grow at a faster rate than other stocks

27
Q

Income stocks

A

stocks of public utilities that offer high dividend yield

28
Q

Penny Stocks

A

Ownership in companies that compete in high risk industries like oil companies

29
Q

Beta

A

degree of stock’s risk

30
Q

When central bank unexpectedly increases interest rates, the currency

A

strengthens

31
Q

When central bank unexpectedly increases interest rates bond yields

A

rise

32
Q

When yields are high, lenders are ______, borrower are _____

A

happy; borrowers are sad

33
Q

finance lingo: long

A

buying

34
Q

finance lingo: short

A

selling

35
Q

Market interest rates and bond prices move is

A

Opposite directions

36
Q

Exchange traded fund

A

A basket of assets that is traded like a common stock. You indirectly own the asset. Ex fidelity creates their own ETF where they include stock of J.P. Morgan, BofA, Goldman Sachs. And the price is the avg stock price.

37
Q

How to you buy stock?

A

You have to go to broker ex fidelity they give You access to open stock market. You can place market price or limit price

38
Q

Mutual fund

A

Managed portfolio of stock or bonds. No voting rights.

39
Q

Money market funds

A

Risk free rate of short term debt mostly gov treasury bills. The safest but not much returns

40
Q

S&P 500

A

Index of 500 large cap companies. It is a good gauge of the market becuz it takes into consideration of large portion of market

41
Q

Stock market index

A

A measurement of value of a stock market. Computed from price of selected stocks. It is used to describe the market. It cannot be invested in directly.

42
Q

Dow jones indu avg (DJIA)

A

Stocks of 30 of the largest and most influential companies using a price weighted index AKA avg of per share price of the 30 comps. But need to consider stock splits etc

43
Q

NASDAQ

A

Stock exchange that is all computer based. Mostly tech comps that are too small to be listed in NYSE.
HAS better returns but more risk bc companies are small

44
Q

NYSE

A

Stock exchange where there is human interaction and mantainance.
Only large companies that meet certain requirements can join