Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
45 Cards in this Set
- Front
- Back
|
Finance
|
Study of how individuals, institutions, governments, and businesses acquire, spend, and manage money and other financial assets.
|
|
|
Financial environment
|
Encompasses the financial system, institutions, markets, and individuals that make the economy operate efficiently.
|
|
|
Financial inst.
|
Help the financial system operate efficiently and transfer funds from savers to investors
|
|
|
Financial markets
|
Physical locations or electronic forums that facilitate the flow of funds
|
|
|
Investments
|
Area involves sale or marketing of securities, analysis of securities, and management of investment risk
|
|
|
Financial management
|
Involves financial planning, asset management, and fund raising decisions to enhance firm value
|
|
|
Entrepreneurial finance
|
Study of how growth-driven, performance-focused, early-stage firms raise funds and manage operations and assets
|
|
|
Personal finance
|
Study of how individuals prepare for financial emergencies, protect against premature death and the loss of property, and accumulate wealth
|
|
|
Time value of money
|
Money in hand today is worth more than the promise of receiving the same amount of money in the future
|
|
|
Time value of money
|
Exists because a sum of money today could be invested and grow over time
|
|
|
Risk-return tradeoff
|
Concerns the uncertainty about the outcome or payoff of an investment in the future
|
|
|
No
|
Are all investment risks the same?
|
|
|
Risk can be removed or diversified by investing in several different assets or securities
|
How may risk be removed or diversified?
|
|
|
1. A financial market is efficient if at any time the prices of securities reflect all information available to the public
|
1. How can we tell if a financial market is information efficient?
|
|
|
2. When new information becomes available prices quickly change to reflect that information
|
2. What happens in an efficient market when new information is available?
|
|
|
Liquidity and fair prices
|
What do efficient markets provide?
|
|
|
To maximize returns on their investments
|
What is the goal of owners?
|
|
|
To emphasize the size of firm sales, assets, or other perks
|
What is the goal of managers
|
|
|
Tie manager compensation to performance measures beneficial to owners
|
How can managers and owners get along
|
|
|
Yes it does. It shows high quality ethical behavior
|
Does reputation matter and what does it show?
|
|
|
Policy makers
|
President, congress & US treasury federal reserve board
|
|
|
Pass laws & set fiscal & monetary policies
|
What do policy makers do?
|
|
|
Monetary system
|
Federal reserve central bank and commercial banking system
|
|
|
They create & transfer money
|
What does the monetary system do?
|
|
|
Financial inst.
|
Depository inst., contractual savings org., securities firms and finance firms
|
|
|
Accumulate and lend/invest savings
|
What do financial inst. do?
|
|
|
Financial markets
|
securities markets, mortgage markets, derivatives markets, and currency exchange markets
|
|
|
Market & facilitate transfer of financial assets
|
What do financial markets do?
|
|
|
Money markets
|
Where are debt securites with maturities of one year or less issued/traded?
|
|
|
Capital markets
|
Where are debt securites with maturities of more than one year and corporate equity securities issued/traded?
|
|
|
Primary markets
|
Where the initial offering/origination of debt and equity securities between investors occurs
|
|
|
Secondary markets
|
Where the transfer of existing bonds, mortgages, and equity securities between investors occurs
|
|
|
Debt securities markets
|
Where money market securities, bonds, & mortgages are sold and traded
|
|
|
Equity securities markets
|
Where ownership rights in the form of stocks are initially sold and traded
|
|
|
Derivative securities markets
|
Where financial contracts that derive their values from underlying securities are originated and traded
|
|
|
Foreign exchange markets
|
Electronic markets in which banks & traders by and sell currencies on behalf of businesses and clients
|
|
|
Mortgage
|
loan backed by real property in the form of buildings and houses
|
|
|
Fixed-rate mortgage
|
fixed interest rate with a constant periodic payment over the real estate loan's life
|
|
|
Securitization
|
process of pooling or packaging mortgage loans into debt securities
|
|
|
Adjustable-rate mortgage (ARM)
|
interest rate and periodic payments that vary with market interest rates over the real estate loan's life
|
|
|
Mortgage-backed security
|
debt security created by pooling together a group of mortgage loans
|
|
|
Credit rating
|
likelihood that borrower will pay a debt
|
|
|
Credit score
|
likelihood that a borrower will make loan payments when due
|
|
|
Prime mortgage
|
home loan to those with high credit score
|
|
|
Subprime mortgage
|
home loan to those with low credit score
|
