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13 Cards in this Set

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What is an investment?
An investment is the current commitment of money or other resources in the expectation of reaping future benefits.
What are real assets?
Assets used to produce goods and services.
What are financial assets?
Claims on real assets or the income generated by them.
Fixed income securities.
Fixed income securities promise either a fixed stream of income or stream of income that is determined according to a specified forula.
Money market.
Fixed income securities that are short term, highly marketable, and generally very low risk.
Fixed income capital market.
Includes long-term securities such as Treasury bonds, as well as bonds issued by federal agencies, state and local municipalities, and corporations.
Equity.
An ownership share in the corporation. The performance of equity securities is tied directly to the performance of the firm.
Derivative securities.
Provide payoffs based on the prices of other assets such as bond or stock prices.
Agency problem.
Conflicts of interest between managers and stockholders.
Investment process.
Objective setting
Security Selection
Asset allocation
Performance Measurement
Passive management.
Buying and holding a diversified portfolio without attempting to identify mispriced securities. This managment philosophy is based upon the idea that securities are already priced fairly with respect to their risk.
Active managment.
Attempting to identify mispriced securities or to forecast broad market trends.
Financial intermediaries.
Institutions that connect borrowers and levders by accepting fuds from lenders and loaning funds to borrowers.