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51 Cards in this Set
- Front
- Back
Simple Interet |
the interest paid on a balance of funds for one period of time, usually for a year or less |
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Compound Interest |
interest applies when, the time period is greater than one year OR the payment period for interest is less that one year and the principal accumulates interest for multiple periods |
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Lump Sum |
single deposit or payment |
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Annuity |
series of deposits or payments
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Principal |
the amount borrowed |
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Risk |
one of the main investing factors and the variation in the returns on an investment |
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Expected Return |
one of the main investing factors and it's the average return on an investment over the long run |
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Bull Market |
period when the market prices rise |
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Bear Market |
period when market prices fall |
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Business Risk |
variation in a firm's value due to the firm's product |
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Liquidity Risk |
risk of being able to immediately sell an investment at its market value |
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Management Risk |
variation in a firm's return attributable to the company's management |
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Market Risk |
variation in returns that is related to the market returns |
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Diversification |
combining a number of investments into a portfolio |
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Commercial Banks |
main source of funds is deposits, banks then use those funds to issue loans of all types |
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Credit Union |
owned and financed through its members |
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Finance Company |
raises funds rather than accepting deposits |
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Securities Firms |
sells securities to investors |
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Security |
is an investment that provides evidence of a financial claim |
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Investment Banks |
Assits corporations in raising capital by selling securities to investors
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Mutual Fund |
raises funds by selling its stocks and investing those funds in stocks, binds, ect... |
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Pension Funds |
provides income to employees upon retirement |
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Insurance Companies |
accepts money on a "float", invests that money for financial gain, then pays money back to investors in claims |
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Real Estate Investment Trust (REIT) |
company that invests in income-producing properties |
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Transactions Motive |
in case you need to make purchases |
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Precautionary Motive |
financial cushion in case of unseen circumstances |
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Speculative Motive |
if you expect prices to fall, it may be better ti hold cash until you can optimize you buying power |
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Growth |
buying stocks with potential for high growth |
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Value |
purchasing stocks whose fundamental value is greater than the current price |
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Preferred Stock |
stock that receive a fixed dividend and owns a fixed amount of the corporation. Dividends remains the SAME regardless of financial success |
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Common Stock |
share of ownership in a corporation. Dividends INCREASE as the corporation's profits raise |
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Limit Order |
order to buy or sell at a specified price |
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Market Order |
order to buy or sell a security immediately at the best quoted price |
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Good-till-Cancelled Order |
order to buy or sell securities will stay open until cancelled |
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Buying Stock on Margin |
the investor pays for a portion of the total purchase price and the brokerage firm lends the investor the remainder |
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Initial Margin Requirement |
percent of funds needed to buy a security with borrowed money |
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Maintenance Margin Requirement |
margin percent that an investor must maintain in an investment position` |
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Margin Call |
call to deposit additional funds in a margin account |
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ADRS |
transactions occur on a US exchange, investors avoid costs of exchanging US dollars to foreign currency, dividends are paired in US dollars |
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Holding Period Return |
(PriceEnd - PriceBeginning + Income) / PriceBeginning |
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Dividend |
income received from companies of mutual funds that you have invested in |
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Dividend Discount Model |
Stock Value = (Dividend * (1+ Growth Rate)) / (Required Rate of Return - Growth Rate) |
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Zero Coupon Bond |
makes no interest payment before maturity, sells at a discount to investors and then pays the face value of the bond at maturity |
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Floating Interest Bond |
the interest rate that the bond pays will vary depending on the current interest rate |
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Investment Grade Bonds |
high creditworthiness ranks from AAA to BBB |
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Speculative (Junk) Bonds |
riskier credit ranks from BB and lower |
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Current Yield |
(annual interest) / (bond price) |
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Yield to Maturity |
the total return of the life of a bond, includes all interest payments and profit/loss from the bond principal payment |
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Par Value |
the face value of the bond, it's the principal owed on a bond |
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Load Fund |
funds that charge a load to purchase (or possibly redeem) shares |
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No-load Funds |
funds that don't charge a load to buy or redeem shares |