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Midterm > IPM > Flashcards

IPM Flashcards

1
Q

functions as an intermediary and facilitates the flow
of funds from the areas of of surplus to the areas of
deficit. It is a composition of various institutions
markets, regulations and laws, practices, money
managers, analysts, transactions, and claims &
liabilities

A

FINANCIAL SYSTEM

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2
Q

SIX PARTS OF THE FINANCIAL SYSTEM

A

Money
Financial Instruments
Financial markets
Financial institutions
Government regulatory agencies
Central banks

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3
Q

to pay for our purchases and to store
our wealth.

A

Money

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4
Q

to transfer resources
from savers to investors and to transfer risk to
those who are best equipped to bear it. Stocks, mortgages, and insurance policies are examples
of

A

Financial instruments

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5
Q

allows us to buy and sell
financial instruments quickly and cheaply. The
Philippine Stock Exchange is an example of a
financial market.

A

Financial markets

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6
Q

provide a myriad of
services, including access to the financial
markets and collection of information about
prospective borrowers to ensure they are
creditworthy. Banks, securities firms, and
insurance companies are examples of

A

Financial Institutions

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7
Q

they are
responsible for making sure that the elements of
the financial system-including its instruments, markets, and institutions-operate in a safe and
reliable manner.

A

Government regulatory agencies

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8
Q

monitor and stabilize the
economy. The Bangko Sentral ng Pilipinas is the
central bank of the Philippines

A

Central Banks

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9
Q

CORE PRINCIPLES OF MONEY AND
BANKING

A

Core principle
1. TIME HAS VALUE
2. RISK REQUIRES COMPENSATION
3. INFORMATION IS THE BASIS FOR DECISIONS
4. MARKETS DETERMINE PRICES AND ALLOCATE RESOURCES
5. STABILITY IMPROVES WELFARE

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10
Q

is the process of buying assets that
increase in value over time and provide returns in
the form of income payments or capital gains.

A

Investing

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11
Q

is the net gain or loss of an
investment over a specif ed time period, expressed as
a percentage of the investment’s initial cost.

A

rate of return (RoR)

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12
Q

The uncertainty regarding the outcome of a
situation

A

Risk

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13
Q

The possibility that an investment
will fail to pay the expected return or fail to pay a
return at al

A

Investment risk

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14
Q

FINANCIAL RISK PYRAMID

A

Speculation
Wealth accumulation- investment
Financial security - Saving tools

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15
Q

The rise in the general level of price

A

Inflation

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16
Q

The danger that money won’t be
worth as much in the future as it is today..

A

Inflation risk

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17
Q

Each individual has a tolerance level for the
amount of risk they are willing to take on the
greater the risk a person is willing to make on an
investment, the greater the potential return will
be.

A

INVESTMENT PHILOSOPHY

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18
Q

TYPES OF INVESTMENT TOOLS
SBMIRS

A
  1. Stocks
  2. Bonds
  3. Mutual Funds
  4. Index Funds
  5. Real Estate
  6. Speculative Investments
19
Q

A share of ownership in a company

A

Stocks

20
Q

-owner of the
stocks

A

Stockholder or shareholder

21
Q

RETURN OF STOCKS
Here are two ways people can make money on stocks:

A

Dividends
Market price

22
Q

are the share of profits
distributed in cash to stockholders

A

DIVIDENDS

23
Q

the current price that a buyer is
willing to pay for stock

A

Market price

24
Q
  • stocks are bought and sold on
    _______ by people called ______

The main stock markets in the U.S. are:

A

STOCK MARKETS

brokers

New York Stock Exchange (NYSE)
NASDAQ

25
Q

______ are loans
 A company or government will borrow money
from investors by issuing _____

A

Bonds

26
Q

-reduces risk by
spreading investment money among different
investment tools
 Creates a collection of investments that will
increase return while reducing risk
 The main goal of diversification is to reduce
risk.

A

Portfolio Diversification-

27
Q
  • invests money in a diversified
    portfolio of stocks and bonds.
A

Mutual fund

28
Q

TYPES OF MUTUAL FUNDS
(MBEBE)

A

Money Market Funds
 Bond Funds
 Equity Funds
 Balanced Funds
 Equity index Funds

29
Q

KINDS OF MUTUAL FUNDS
EBFM

A

Equity
 Balanced
 Fixed income
 Money market

30
Q

is the value of a group of stocks
or other investments.

A

market index

31
Q

are intended to represent an
entire stock market and thus track the market’s
changes over time.

A

Market indexes

32
Q

A mutual fund that was designed to reduce fees
by investing in the stocks and bonds that make
up an index.
Offers high diversification with low fees.

A

Index fund

33
Q

 Includes any residential or commercial property
or land as well as the rights accompanying that
land

A

REAL ESTATE

34
Q

Have the potential for significant fluctuations in
return over a short period of time.
 Recommended for people with an aggressive
investment philosophy and a high level of
financial security

A

SPECULATIVE INVESTMENTS

35
Q

that acts
as a buying and selling agent for the investor

A

brokerage firm

36
Q

Offer investment advice and one-on-one
attention from a broker.

  • Complete investment transactions
A

Full service general brokerage firm.

37
Q
  • Only complete investment transactions.
  • Offer no advice to investors but charge
    40-60% l
A

Discount Broker

38
Q

Profits earned on investments are considered to
be income.

Income taxes MUST be paid on this money.

A

TAXATION

39
Q

forms of returns: IDP

A

interest,
dividends,
price appreciation

40
Q

Allows a person to easily calculate when the
future value of an investment will double the
principal amount

Formula?

A

Rule of 72

72÷interest rate = number of year needed to double the principal investment

41
Q

What Can the “Rule of 72” Determine?

A

 How many years it will take an investment to
double at a given interest rate using
compounding interest

 How long it will take debt to double if no
payments are made

 The interest rate an investment must earn to
double within a specific time period

 How many times money (or debt) will double in
a specific time period

42
Q

Rule of 72” FYI

A

 The rule is only an approximation
 The interest rate must remain constant
 The equation does not allow for additional
payments to be made to the original amount
 Interest earned is reinvested
 Tax deductions are not included within the
equation

43
Q

Formula for ROR

A

Ror= current value - original value/original value x 100

Midterm (1 decks)

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