review

Question 1

What are real assets?

Answer 1

A tangible asset such as real estate, gold, etc.

Question 2

What are financial assets?

Answer 2

Intangible asset such as stocks, bonds, etc.

Question 3

What are financial intermediaries?

Answer 3

Institutions that ‘connect’ borrowers and lenders - acts as the middle man and they pool money

Question 4

Who are borrowers?

Answer 4

Users of capital

Question 5

Who are lenders?

Answer 5

Suppliers of capital

Question 5

What are 3 types of investment companies?

Answer 5

Open ended, close ended and unit investment trust

Question 6

What are types of pools of money?

Answer 6

Hedge funds
ETFs
Mutual funds
Stock funds
Funds of funds
Pension funds
REIT

Question 7

What are close ended funds?

Answer 7

Trades on exchange

Question 8

What are open ended funds?

Answer 8

Traditional mutual funds - issue/redeem shares once a day

Question 9

What is the difference between a traditional open ended fund vs an ETF?

Answer 9

ETFs trade like stocks on an exchange, with prices fluctuating throughout the day
Mutual funds are prices once at the end of the day based on NAV

Question 10

What is securitization?

Answer 10

Financial instrument for an illiquid asset

Question 11

What do investment banks do?

Answer 11

Help companies raise capital/funds
Advise on mergers, strategic actions, etc.

Question 12

What is a primary market?

Answer 12

Firm sells stock for the first time - IPO

Question 13

What is a secondary market?

Answer 13

Companies start trading on exchanges

Question 14

What is a derivative security?

Answer 14

Security that gets its value from another underlying asset

Question 15

What is a money market fund?

Answer 15

Similar to a mutual fund, and has a NAV of $1

Question 16

What are the types of treasuries?

Answer 16

T-bill - < 1 year
T - notes - 2 - 10 years
T - bonds - 10 - 30 years

Question 17

What are types of stock markets?

Answer 17

Dealer market - scattered locations, heavily electronic = NASDAQ
Auction market - specialists responsible for specific stocks = NYSE

Question 18

What are types of orders?

Answer 18

Limit
Market
Stop loss
Stop buy

Question 19

What is limit order?

Answer 19

An order to buy/sell a security at a lower/higher price

Question 20

What is a market order?

Answer 20

An order to sell/buy immediately

Question 21

What is a stop order?

Answer 21

An order to buy/sell a security once its price reaches a certain point

Question 22

What is a systematic risk?

Answer 22

A risk that affects the entire market, rather than a certain company/industry

Question 23

What is an unsystematic risk?

Answer 23

A risk that is unique to a company/industry rather than the entire market

Question 24

What is a weak form market hypothesis?

Answer 24

All historical prices and volume are already reflected

Question 25

What is a semi-strong form of market hypothesis?

Answer 25

All historical prices and volume are already reflected and all publicly available information is already reflected

Question 26

What is a strong form of market hypothesis?

Answer 26

All historical prices and volume are already reflected and all publicly available and inside information is already reflected

Question 27

What is sector rotation?

Answer 27

A top-down investment approach where investors move money from one sector to another based on the market situation

Question 28

What is the industry life cycle?

Answer 28

Lululemon: Start up - started with 1 store Growth - continued building stores Maturity - well known and big around the world Decline - loses USP, becomes common and less popular

Question 29

How do you calculate arithmetic mean?

Answer 29

Sum of all HPRs/n

Question 30

How do you calculate geometric mean?

Answer 30

((1+HPR)^1)/n-1

Question 31

How do you calculate sharpe ratio?

Answer 31

Expected return - risk free rate/SD

Question 32

How do you calculate varience?

Answer 32

Total sum of (actual rate of return - mean) / n

Question 33

How do you calculate SD?

Answer 33

Square root of total sum of (actual rate of return - mean) / n

Question 34

How do you calculate excess return?

Answer 34

Rp - Rf Rp = return of the portfolio

Question 35

How do you calculate NAV?

Answer 35

NAV = assets + A/R - L)/# shares

Question 36

How do you calculate TO?

Answer 36

($sold + repurchased)/total assets

Question 37

What is rule of 72?

Answer 37

Calculate how long it takes to double your money Take 72 and divide by its interest rate you hope to earn