Part 2 Flashcards
Monetary Policy
Federal reserve board- “Money”
reserve requirements, discount rate, and open market operations
Top down
- economy 2. industry 3. company
Leading
where economy is headed
Lagging
Where we’ve been
Positive Yeild
yields increase as maturities lengthen
greater risk, greater return
Negative/ inverted yield
short term maturities higher yield than long-term
most sensitive to fed policy
balance sheet
assets - liabilities
Assets
current or fixed
liabilities
current or long term
income statement
period of time
income statement
sales (revenues) - expenses = operating costs
net income
operating income - interest and taxes
Form 8K
event-driven, where new things are shown
Future value
what will an investment make today at a given rate of return be worth at some point in the future
future value
rate of return
Present value
How much needs to be invested today at a given rate to equal a specified value at a point in the future
Present value
the future goal, time to reach the goal, the anticipated rate of return, required contribution to reach goal
Present value formula
PV= FV + (1+r)N
R= rate of return N= number of years
Net Present value
subtract the cost of the investment from the present value of the future returns
Internal rate of return
the discount rate that results in a net present value of zero for a series of future cash flows
Beta
a measure of stock’s co-movement relative to a benchmark
Measures systematic risk, associated with market risk in general
Alpha
Compare the actual return in excess of the risk-free rate to the expected return
standard deviation
measures the volatility of an investment compared with past returns
interest rate risk
as interest rates go up, fixed income prices go down and vice versa
inflation (purchase power) risk
erosion of buying power of the local currency unit
impact on fixed-dollar investments
liquidation priority
secured debt, general creditors, subordinated debt, preferred stockholder, common
