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14 Cards in this Set
- Front
- Back
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Designing Financial Instrument: Three Variables
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1. Investor's claim on future cash flow
2. Investor's right to participate in decisions 3. Investor's claims on assets in the event of liquidation |
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Lower interest rates encourage companies to invest, but discourage individuals to invest
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[]
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Fixed Income (bonds)
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Par value (ex 1000)
Coupon Rate - interest payment on the par value |
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Bond Call Option
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Takes advantage of declines in interest rates
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Where do they trade?
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Individuals - mutual funds, various
Corporations - ... |
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Market Capitalization
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Measure of company size
-Market price times the number of shares -Greater the capitalization=larger company |
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Two Types of Stocks
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Growth - more expensive than market, earnings expected to grow
Value - Cheaper than market, intend to hold long-term |
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International VS Global Stock
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International - Investing outside the US (Includes just NON-US)
Global - Investing international and US (includes ALL) |
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Preferred Tax Disadvantage
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No tax benefit (deduction) on preferred
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Private Equity Financing
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Typically for startups - too risky for banks, too small for ____
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Private Placement
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Sell securities to small group of investors (banks)
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Rule 144a
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Private Placement for trading among qualified investors
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Bearer Bond
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Owned by whoever is holding it, not registered. Tool for tax evasion.
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Efficient Market Hypothesis
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Impossible to beat the market, only way to gain higher returns is to seek riskier investments. Market price includes all relavent information.
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