Quiz 1 Terms

Question 1

Debt

Answer 1

A loan that obligates the borrower to make periodic interest payments and to repay the full amount of the loan by a set date

Question 2

Equity

Answer 2

Represents ongoing ownership in a business or property

Question 3

Individual investors

Answer 3

Manage their own funds to achieve their financial goals

Question 4

Institutional investors

Answer 4

Investment professionals who earn their living by managing other people’s money.

Question 5

Money market

Answer 5

market where short-term debt securities (with maturities less than one year) are bought and sold

Question 6

Capital market

Answer 6

Classified as either primary or secondary

Question 7

Primary market

Answer 7

The issuer of the equity or debt securities receives the proceeds of sales *IPO

Question 8

Secondary market (after market)

Answer 8

Where securities are traded after they have been issued, they go from investor to investor

Question 9

Broker markets

Answer 9

Consists of national and regional securities exchanges, example: NYSE

Question 10

Dealer markets

Answer 10

No centralized trading floors, it is made up of a large number of market makers who are linked via a mass electronic network

Question 11

Broker

Answer 11

any person engaged in the business of buying or selling securities for the account of others

Question 12

Dealer

Answer 12

any person engaged in the business of buying or selling securities, but for their own account

Question 13

Long purchase

Answer 13

A transaction in which investors buy securities, in the hope that they will increase in value and can be sold later for profit (buy low and sell high)

Question 14

Short selling

Answer 14

when an investor borrows securities from a broker and sells these securities in the marketplace. Later, when the price of the issue has declined, the short seller buys back the securities and then returns them to the lender. Keep the difference as profit

Question 15

Cash account

Answer 15

Where the customer can make only cash transactions

Question 16

Margin account

Answer 16

An account in which the brokerage firm extends borrowing privileges to a creditworthy customer

Question 17

Market order

Answer 17

An order to buy or sell stock at the best price available at the time the investor places the order

Question 18

Limit order

Answer 18

You name your price. Buy or sell only at that price or better

Question 19

Stop order

Answer 19

Set a point. If the price reaches that point, it triggers a buy or sell at the best available price.

Question 20

Stop limit order

Answer 20

Has a “stop” and a “limit”. Stop-limit order sells at a specific price or better but might not execute if the market doesn’t meet that price