Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Finance > Quiz 3 > Flashcards

Quiz 3 Flashcards

You may prefer our related Brainscape-certified flashcards:
Series 65 flashcards Series 63 flashcards Series 66 flashcards Series 7 Top-off Exam flashcards SIE Exam flashcards CFA flashcards Series 79 Top-Off Exam flashcards
1
Q

interest

A

the cost of borrowing money

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

who sets short term interest rates

A

the Federal Reserve

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

who sets long term interest rates

A

by the bond market based on expectations of inflation

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

what does real mean

A

after inflation, adjusted to remove the affects of inflation

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

what is the opposite of real

A

nominal, doesnt differentiate inflation from earnings

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

positive real rate of interest

A

interest rate growth is greater than rate of inflation

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

negative real rate of interest

A

interest rate growth is smaller than rate of inflation, losing money

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

spread

A

difference between two interest rates

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

nominal risk free rate

A

interest rate on US Treasury securities

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

basis point

A

one hundredth of a percent

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

What are money markets

A

treasury debt securities maturing in less than 1 year

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

What are bonds

A

treasury debt securities maturing in more than 1 year

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

inflation premium

A

average projected annual inflation rate over the life of the investment

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

r*

A

real risk free rate

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

real risk free rate

A

the interest rate on a risk free security, assuming no inflation, not on treasuries

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

default risk (credit Risk)

A

possibility the borrower will not make scheduled interest or principal payments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

types of US Securities

A

bills (shortest), notes (2-10), bonds (10+)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

bond rating agencies

A

Moodys

S&P

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

what do bond ratings measure

A

the borrowers ability to make payments on interest and principal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

S&P

A

standard and poor

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

can bond ratings change over time

A

yes, rating up or downgrade

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

money market

A

market for short term debt securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

bonds are on which financial statement

A

balance sheet

24
Q

buyer of money market

A

investors for less than one year

25
Q

sellers of money market

A

corps and govs seeking to borrow for less than one year

26
Q

what is bankers acceptance used for

A

to facilitate international trade

27
Q

3 money market instruments

A

bankers acceptance
t bills
commercial paper

28
Q

which treasury security is a money market instrument

A

t-bills

29
Q

what are t-bills issued at, can they be sold early

A

discount, yes at any time using a broker

30
Q

alternate name for security broker

A

stockbroker

31
Q

is commercial paper secured and what is the required investment

A

not secured, over 1 million, high

32
Q

who sells bonds to the public

A

stockbroker

33
Q

are bonds equity or debt securities, what type

A

debt, long term

34
Q

what are bonds classified as on the balance sheet

A

liabilities

35
Q

par value of a bond, does it change

A

the amount issuers agree to repay upon maturity, no

36
Q

coupon rate

A

reflects the market rate of interest at the time the bond was issued

37
Q

indenture

A

contract between the issuer and the bondholder

38
Q

trustee

A

protects the bondholders interest (broker)

39
Q

covenants

A

restrictions placed on the borrower

40
Q

sinking fund

A

requires issuers to retire a portion of the issued bonds per year

41
Q

what does the indenture specify

A

interest payment, frequency of payment, maturity date, collateral if any

42
Q

fixed rate bond

A

coupon rate remains the same over the life of the bond

43
Q

variable rate bond

A

coupon rate varies over the life of the bond

44
Q

alternate names for variable rate bond

A

floating or adjustable rate

45
Q

how do market prices change for bonds

A

if new bonds issued at a higher rate, market price for old goes down
if new bonds issued at lower rate, market price for old goes up

46
Q

2 institutions that invest in bonds because they provide income

A

pensions and insurance agencies

47
Q

component of total return bonds make up

A

income

48
Q

2 components of total return

A

income and growth

49
Q

what 2 factors influence bond prices, why market value would change

A

ratings and coupon rates

50
Q

examples of income from total return

A

interest from bonds and dividends from stocks

51
Q

alternate name for growth

A

capital gain

52
Q

current yield formula

A

coupon rate / current market value

53
Q

which portion of total return does current yield measure

A

only income

54
Q

how is a bonds market price and yield related

A

inversely

55
Q

bond discount is when

A

market price is lower than face value

56
Q

bond premium is when

A

market price is higher than face value

Finance (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions