Prelims Exam Flashcards
Assets acquired to realize income or earn profits
Investment
Refers to the money deposited into a bank account with funds that can be withdrawn on-demand at any time
Demand Deposit
Financial market that offers short-term, low-risk securities
Money Market
A type of deposit account held at a financial institution where money is locked up for some set period of time
Time Deposit
Collection of financial assets that may be held by individual investors or managed by financial professionals, hedge funds, banks or other financial institutions
Investment Portfolio
Venues for buying and selling financial instruments
Financial Markets
Spreading of investable funds to different investment items.
Diversification
Factor in allocating investable funds referring to the period it will take for the investment to mature or earn
Time Horizon
Short-term government securities that mature in less than a year
Treasury Bills
Financial instruments whose value is derived from the value of other assets
Derivatives
Factor in allocating investable funds referring to the level of risk an investor is willing to take
Risk Tolerance
A financial market where financial instruments dealt with are longer and riskier securities
Capital Market
In a trust investment, this refers to the entity making the investment
Trustee
Short-term security offered by private corporations
Commercial Papers
A type of risk tolerance where investors balance their investments between risky and safe asset classes
Moderate Risk Tolerance
Treasury bills are issued by private corporations.
False
Savings deposit is a low interest-earning investment.
True
Savings deposits earn more interests than time deposits.
False
High risk investments can be bought in capital markets.
True
Transaction costs increase when investments are diversified.
True
Commercial papers mature in less than a year.
True
Term deposits cannot be pre-terminated.
False
An investor with an aggressive risk tolerance will prefer low-risk financial instruments.
False
Checking accounts may or may not earn interests.
True
Over-diversification may result to the inability of the investor to keep track of developments in each item of his/her investments.
True
Savings deposits can be withdrawn through over-the-counter, ATM, and issuance of checks.
False
In a Trust investment, the bank is the trustee.
True
Demand deposits and term deposits are covered by the PDIC.
True
Miscalculating risk tolerance is common mistake in investing.
True
Money market investments are offensive investments.
False
