Chapter 2 Finance

Front 1

Serves as a middle man and facilitates the issuance of securities

Back 1

Investment banks

Front 2

3 kinds of capital transfers from borrowers to savers

Back 2

1. Direct transfer

2. Indirect transfer through investment banks

3. Ndirect transfer through financial intermediary

Front 3

_________ are necessary for a growing economy.

Back 3

Efficient financial markets

Front 4

Indirect transfer through investment banks is also called_____.

Back 4

Primary market transaction

Front 5

The markets in which assets are bought or sold for "on the spot" delivery

Back 5

Spot markets

Front 6

The markets in which participants agree today to buy or sell an asset at a future subject.

Back 6

Futures markets

Front 7

Are markets also called intangible or real are for products such as wheat, autos, real estate computers, machinery

Back 7

Physical asset markets

Front 8

Are the markets for short term, higly liquid debt securities.

Back 8

Money markets

Front 9

Deals with stocks, bonds, notes and mortgages. Also deals with derivative securities

Back 9

Financial asset markets

Front 10

The financial markets in which funds are borrowed or loaned for short term periods.

Back 10

Money markets

Front 11

Markets for intermediable or long term debt and corporate stocks

Back 11

Capital markets

Front 12

The financial markets for stocks and for intermediate or long term debt

Back 12

Capital markets

Front 13

Are the markets in which corporations raise new capital

Back 13

Primary markets

Front 14

Are the markets in which existing already outstanding securities are traded among investors

Back 14

Secondary markets

Front 15

Markets in which corporations raise capital by issuing new securirties.

Back 15

Primary markets

Front 16

Markets in which securities and other financial assets are traded among investors after they have been issued by corporations

Back 16

Secondary markets

Front 17

Are organizations that operate much like hedge funds; but rather than buying some of the stock of the firm, thry buy and then manage entire firms.

Back 17

Private equity companies

Front 18

Largest financial institution in the world

Back 18

Citigroup

Front 19

Stocks are traded using a variety of market procedures but there are just 2 basic types:

Back 19

(1) Physical location exchanges

(2) Electronic dealer-based markets

Front 20

Who are the 2 leaders?

Back 20

New York Stock Exchange (NYSE) and the Nasdaq stock market

Front 21

________, previously issued securities are traded in secondary markets.

Back 21

Outstanding

Front 22

Formal organizations having tangible physical locations that conduct auction markets in designated securities.

Back 22

Physical location exchanges

Front 23

A large collection of brokers and dealers, connected electronically by telephones and cmputers' that provides for trading in unlisted securities.

Back 23

Over-the-Counter (OTC) Markets

Front 24

Most actve secondary market, more important one to fnancial managers

Back 24

Stock markets

Front 25

Includes the NYSE, the American stock exchange(AMEX) and several regional stock exchanges

Back 25

Physical location exchanges

Front 26

The _____ is actually a modifed auction market wherein people bid stocks.

Back 26

NYSE

Front 27

Who facilitate the trading process by keeping an inventory of stocks in which they specialize.

Back 27

Specialist

Front 28

Includes all facilities that are needed to conduct security transactions not conducted in physical location exhanges

Back 28

Dealer market

Front 29

The difference between bid and ask prices represents the dealer's markup or profit.

Back 29

Bid-ask spread

Front 30

Brokers and dealers who participate in the OTC market are members of a self-regulatory body known as

Back 30

National Association of Securities Dealers (NASD)

Front 31

The computerized network used by NASD is known as the

Back 31

NASD Automatic Quotation System (Nasdaq)

Front 32

Started as just a quotation system but it has grown to become an organized securities market with its own listing requirements

Back 32

Nasdaq

Front 33

______ has invested in London Stock Exchange and other market makers while the ______ merged with Euronext.

Back 33

Nasdaq; NYSE

Front 34

Companies are so small that their common stocks are not actively traded. They are owned by relatively few people usually the companies' managers

Back 34

Privately owned or closely held corporations

Front 35

Stocks of the closely held corporations

Back 35

Closely held stocks

Front 36

This ______ makes it difficult to compare the volume between stock markets.

Back 36

Double counting

Front 37

Have a significant influence on the prices of individual stocks.

Back 37

Institutional investors

Front 38

Stocks are owned in large companies by thousands of investors

Back 38

Publicly owned corporations

Front 39

Outstanding shares of established publicly owned companies that are traded :

Back 39

Secondary market

Front 40

The company receives no new money when sales occur in this market.

Back 40

Secondary market

Front 41

Outstanding /used shares are for _____ markets

Back 41

Secondary

Front 42

A corporation that is owned by a few ndividuals who are typically associated with the firm's management

Back 42

Closely held corporations/ privately owned

Front 43

Additional shares sold by established publicly owned companies:

Back 43

Primary market

Front 44

The market for stock that is just being offered to the public is called the

Back 44

Inital public offering(IPO) market

Front 45

Initial public offerings made by privately owned companies:

Back 45

IPO market

Front 46

The 3 types of stock market transactions are:

Back 46

1) Outstanding shares of established publicly owned companies that are traded: Secondary market

2) Additional shares by established publicly owned companies: Primary market

3) Initial public offerings made by privately owned firms: IPO market

Front 47

It means that the demand for shares at the offering price exceeds the # of shares issued

Back 47

Oversubcribed

Front 48

In a ______ the actual transaction price is set at the highest price(the clearing price) that causes al of the offered shares to be sold

Back 48

Dutch auction

Front 49

The current price of a stock

Back 49

Market price

Front 50

Price at which the stock would sell if all investors had all knowable information about a stock

Back 50

Intrinsic value

Front 51

Price that balances buy and sell orders at any given time

Back 51

Equilibrium price

Front 52

Market in which prices are close to intrinsic values and stocks seem to be intelligible

Back 52

Efficient market