Exam 1 - Review Flashcards

1
Q

Empirical probability

A

of an event is the ratio of the number of outcomes in which a specified event occurs to the total number of trials
- Empirical probability uses the number of occurrences of an outcome within a sample set as a basis for determining the probability of that outcome. The number of times “event X” happens out of 100 trials will be the probability of event X happening. An empirical probability is closely related to the relative frequency of an event.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Sharpe ratio

A

Risk Premium / standard deviation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What is expected

A

Excepted rate of return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What’s another name for risk premium

A

Excess return

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Spilt investment

A

Funds between safe and risky assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Finance

A

Creation of value : via investing in assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Is household

Surplus or deficit

A

Surplus spending units

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Is firms

Surplus or deficit

A

Deficit spending units

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What does the 3 things markets must be?

A

Efficient
Trust
Competitive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is the flow of funds

A

Circle of households and firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Remember this crisis (teacher said so)

A

Mortgage crisis

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Dodd frank reform act

A
  • Increased transparency
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Volcker Rule

A
  • Limited banks’ ability to trade

for their own accounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Bankers acceptance

A
  • Posted dated check

- Guarantee by commercial bank

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Eurodollars

A
  • It’s time deposit

- Dollar Denominated time deposit in foreign countries

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How much N for discount (price)

17
Q

2 way for quoting price

A
  1. Discount

2. Bey

18
Q

Euro bond and foreign bond difference

A
  • Eurobond: foreign currency-denominated bonds issued by the foreign companies.
    • Most Popular: Most popular Eurobonds: Euro dollar bonds & Euro
      yen bonds
  • Domestic currency-denominated bonds
    issued by the foreign companies..
    - Yankee, Samurai, Arirang, Bulldog bonds
19
Q

Common stock

A
  • Residual claim
    • In the event of bankruptcy, what will stockholders receive?
    – Limited Liability
    • What is the maximum loss on a stock purchase?
  • Preemptive rights
    – Voting rights
20
Q

Preferred stock

A
  • Fixed dividends: limited gains, non-voting
    – Priority over common
    – Tax treatment
    • Preferred & common dividends are not tax
    deductible to the issuing firm
    • Corporate tax exclusion on 70% dividends earned
21
Q

3 type of index calculation

A

Price weighted index
Market value weighted index
Equally weighted index

22
Q

What type of portfolio is price weighted index

What type of weighted scheme

A

Dow jones

Use same number of share for stock

23
Q

Firms invest in what?

A

real assetse

24
Q

Households invest in?

A

financial assets

25
What are the two types of real assets
real assets | - debt equity
26
What are the 2 types of financial assets Assets Liability
``` Assets - durable good -financial assets Liability - Mortgage Consumer Credit - Net worth ```
27
Examples of Financial Intermediaries
Commercial, banks, insurance
28
What's risk premium formula
(Rx - Rf)
29
Spiders | TEST QUESTION
S & P 500
30
Diamonds | TEST QUESTION
Down Jones Inc
31
Cubes | TEST QUESTION
NASDAQ
32
Who issues money market instruments | Treasury Bills
Federal Government
33
Who issues money market instruments | b) Certificates of Deposit
Commercial Banks
34
Who issues money market instruments | c) Commercial Paper
Corporations - only high level company
35
Who issues money market instruments | d) Bankers’ Acceptances
Post dated Check - guarantee by commercial bank
36
Who issues money market instruments | Eurodollars
Foreign countries
37
Who issues money market instruments | f) Repurchase Agreement (Repos)
collateralize short-term debt
38
Who issues money market instruments | g) Broker’s Calls
margin loan
39
Who issues money market instruments | h) Federal Funds
loan for reserve requirement