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AGEC 317 EX1 > ex1 > Flashcards

ex1 Flashcards

1
Q

is an accounting technique used to periodically lower the book value of a loan or an intangible asset over a set period of time

A

Amortization

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2
Q

The restatement of an interest rate (e.g., continuously compounded) in terms of an annualized simple interest rate.

A

Annual Percentage Rate (APR):

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3
Q

a contract between you and another party in which one of you receives regular payments over a fixed period of time, either beginning immediately or at some point in the future.

A

Annuity

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4
Q

is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole

A

Beta

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5
Q

The price at which a dealer is willing to buy securities from a customer.

A

Bid price:

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6
Q

The debt issued by a borrower who promises both to pay interest on the borrowing and to repay the principal borrowed at some future date.

A

Bond or fixed-income security:

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7
Q

The return earned on a bond if held until maturity. Same as Yield-to-Maturity.

A

Bond-equivalent yield

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8
Q

A financial intermediary who matches buyers and sellers and earns commissions for this service.

A

Broker:

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9
Q

Inflation intended to keep up with both a growing money supply and growing population. This kind of inflation is important and necessary as it grows at a sustainable pace.

A

Built-In Inflation

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10
Q

describes the relationship between systematic risk and expected return for assets, particularly stocks

A

Capital Asset Pricing Model (CAPM)

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11
Q

Profit/loss realized by selling an asset at a price higher/lower than the purchase price.

A

Capital gain or loss

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12
Q

When buy and sell orders are matched, the trade is officially recognized, and the trade is recorded by the exchange’s clearinghouse.

A

Clearing (a trade)

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13
Q

An entity associated with or part of an exchange that clears trades.

A

Clearinghouse:

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14
Q

The end of a day’s trading session.

A

Close (markets)

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15
Q

) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care.

A

Consumer Price Index:

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16
Q

occurs when overall prices increase due to increases in the cost of wages and raw materials.

A

Cost-Push Inflation

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17
Q

Trader who tries to profit from daily price movements, opening trading positions in the morning and closing them out at night.

A

Day trader

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18
Q

A financial intermediary who posts prices at which she buys (wholesale or bid price) or sells (retail or ask price) securities.

A

Dealer

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19
Q

A failure to pay a promised payment on a financial contract at the promised time

A

Default

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20
Q

inflation is the upward pressure on prices that follows a shortage in supply, a condition that economists describe as “too many dollars chasing too few goods.”

A

Demand-Pull Inflation

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21
Q

A risk that can be eliminated in a portfolio of securities via diversification.

A

Diversifiable risk

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22
Q

is a risk management strategy that mixes a wide variety of investments within a portfolio.

A

Diversification:

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23
Q

Payment in the form of cash or stocks made to existing stockholders.

A

Dividend:

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24
Q

the quantitative application of statistical and mathematical models using data to develop theories or test existing hypotheses in economics and to forecast future trends from historical data.

A

Econometrics

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25
Q

A market in which security prices “fully and accurately” reflect all relevant information

A

Efficient market

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26
Q

a residual variable produced by a statistical or mathematical model, which is created when the model does not fully represent the actual relationship between the independent variables and the dependent variables.

A

Error Term

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27
Q

A physical or electronic location where buyers and sellers meet to trade a standardized commodity under a given set of rules.

A

Exchange:

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28
Q

The price of one currency in terms of another.

A

Exchange rate

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29
Q

An externality is a cost or benefit caused by a producer that is not financially incurred or received by that producer.

A

Externality

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30
Q

It follows three key objectives when regulating monetary policy in US: maximizing employment, stabilizing prices, and moderating long-term interest rates.

A

Federal Reserve System

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31
Q

Paper assets such as stocks, bonds, and currencies that represent claims to real assets.

A

Financial assets

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32
Q

Linearity: there exists a linear relationship between the independent variable, x, and the dependent variable, y. Independence: there is no relationship between different observations. Homoscedasticity: the residuals have constant variance at every level of x. Normality: The residuals of the model are normally distributed.

A

Four Assumptions of Linear Regression:

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33
Q

Security analysis that involves reading accounting and financial information about a company to determine whether the share is overvalued or undervalued.

A

Fundamental analysis

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34
Q

a condition in which the variance of the residual term, or error term, in a regression model varies widely.

A

Heteroskedastic

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35
Q

A computerized trading strategy pursuing fleeting profit opportunities by trading at the blink of an eye.

A

High-frequency trading (HTF)

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36
Q

a condition in which the variance of the residual term is constant or nearly so.

A

Homoscedasticity

37
Q

acts in statistics whereby an analyst tests an assumption regarding a population parameter

A

Hypothesis Testing:

38
Q

is a type of mutual fund or exchange-traded fund (ETF) with a portfolio constructed to match or track the components of a financial market index

A

Index Fund:

39
Q

is the decline of purchasing power of a given currency over time

A

Inflation:

40
Q

A financial contract that requires the buyer to make periodic payments to a company for protection against a loss event

A

Insurance

41
Q

The rate of return on cash borrowed or lent.

A

Interest rate

42
Q

a form of mathematical regression analysis used to determine the line of best fit for a set of data, providing a visual demonstration of the relationship between the data points

A

Least Squares Method

43
Q

a line through a scatter plot of data points that best expresses the relationship between those points.

A

Line of Best Fit

44
Q

The last minute of trading during which a closing price or a closing range is established

A

Market close (or the closing call):

45
Q

Impediments or costs to a trade such as transaction costs (brokerage commissions and bid-ask prices), trading restrictions, or taxes incurred when transacting in a security.

A

Market imperfections

46
Q

Specially designated dealer on many exchanges who posts ask and bid prices and stands ready to trade at those prices

A

Market maker

47
Q

Trading securities using market power or other means to influence a securities price to one’s own advantage.

A

Market manipulation

48
Q

: A portfolio that holds all the risky assets in a market in the same proportions as they exist in the economy

A

Market portfolio

49
Q

: a statistical technique that uses several explanatory variables to predict the outcome of a response variable.

A

Multiple Linear Regression

50
Q

is the difference between the present value of cash inflows and the present value of cash outflows over a period of time

A

Net present value

51
Q

Any trader other than a commercial trader

A

Noncommercial trader

52
Q

Risk that cannot be eliminated through diversification in a portfolio of securities

A

Non-diversifiable risk

53
Q

a probability distribution that is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean

A

Normal distribution

54
Q

a conjecture in statistics that proposes that there is no difference between certain characteristics of a population.

A

Null Hypothesis

55
Q

Anywhere trading takes place other than at an organized exchange.

A

Over the counter (OTC) market

56
Q

: a security that pays for an infinite amount of time. In finance, perpetuity is a constant stream of identical cash flows with no end.

A

Perpetuity

57
Q

published by the Bureau of Labor Statistics (BLS), is a group of indexes that calculates and represents the average movement in production costs over time.

A

Producer Price Index

58
Q

the probability of obtaining results at least as extreme as the observed results of a statistical hypothesis test, assuming that the null hypothesis is correct.

A

P-Value

59
Q

a variable whose value is unknown or a function that assigns values to each of an experiment’s outcomes

A

Random Variable

60
Q

: An asset such as land, buildings, machines, or commodities, which has a physical form.

A

Real asset

61
Q

: The practice of insurance companies buying insurance policies on the tail risks generated by the insurance policies they have issued

A

Reinsurance

62
Q

a statistical method used in finance, investing, and other disciplines that attempts to determine the strength and character of the relationship between one dependent variable (usually denoted by Y) and a series of other variables (known as independent variables)

A

Regression

63
Q

: A risk premium is the investment return an asset is expected to yield in excess of the risk-free rate of return

A

Risk Premium

64
Q

The US federal government agency in charge of regulating equity and equity options markets.

A

Securities and Exchange Commission (SEC):

65
Q

A financial contract (such as a stock, bond, or derivative) that gives its holder ownership rights over some future cash flows

A

Security

66
Q

Borrowing and selling a security or an asset one does not own.

A

Short selling:

67
Q

The taking of risky trades in the hope of obtaining positive returns.

A

Speculation

68
Q

The price for an immediate transaction of a commodity or security.

A

Spot price (or cash price)

69
Q

refers to a distortion or asymmetry that deviates from the symmetrical bell curve, or normal distribution, in a set of data

A

Skew

70
Q

is a statistic that measures the dispersion of a dataset relative to its mean and is calculated as the square root of the variance.

A

Standard Deviation

71
Q

is the approximate standard deviation of a statistical sample population.

A

Standard Error

72
Q

A limited liability asset that gives the investor ownership rights over the residual value of a company.

A

Stock

73
Q

refers to the risk inherent to the entire market or market segment.

A

Systematic Risk

74
Q

is the possibility that an event at the company level could trigger severe instability or collapse an entire industry or economy

A

Systemic Risk

75
Q

The risk of occurrence of infrequent events that lie on the tails of a probability distribution

A

Tail risk

76
Q

A security analysis technique that involves looking at price patterns and related measures to predict whether a stock’s price is overvalued or undervalued

A

Technical analysis

77
Q

is the concept that a sum of money is worth more now than the same sum will be at a future date due to its earnings potential in the interim.

A

Time value of money

78
Q

The total number of contracts or securities traded during a trading day.

A

Trading volume (or volume)

79
Q

US government debt sold in the form of a zero-coupon bond that has a maximum maturity of one year.

A

Treasury bill (T-bill)

80
Q

are fixed-rate U.S. government debt securities with a maturity range between 10 and 30 years

A

Treasury bond (T-bond)

81
Q

U.S. government debt security with a fixed interest rate and maturity between two and 10 years

A

Treasury note (T-note):

82
Q

when a null hypothesis is rejected, even though it is accurate and should not be rejected

A

Type 1 Error

83
Q

when one fails to reject a null hypothesis that is actually false

A

Type 2 Error

84
Q

refers to a statistical measurement of the spread between numbers in a data set.

A

Variance

85
Q

An expression for investment banking companies, many of which have offices near Wall Street in New York’s financial district.

A

Wall Street

86
Q

: A graph of bond yields as a function of maturity

A

Yield curve

87
Q

is the total return anticipated on a bond if the bond is held until it matures

A

Yield to maturity (or internal rate of return

88
Q

A bond that pays no interest but is sold at a discount from the principal

A

Zero-coupon bond

AGEC 317 EX1 (3 decks)

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