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32 Cards in this Set
- Front
- Back
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putting money into assets for purposes of gaining appreciation in value and increases in income
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investing
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risky and does not guarantee dividends
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stocks
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secure that money will be returned when matured by gov't
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bonds
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accumulation of funds to meet short term need; liquidity
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savings
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gambler; invest on speculation, day traders, look at trends of stock @ beg. of day
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speculation
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[D+(Pe-Pb)]/Pb= % gives comparable way to compare
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stock return
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a market in which owners of firms buy and sell their claims
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stock market
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2 types of markets
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primary and secondary
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degree of uncertainty reflected in volatility of returns measured in Standard Deviation (total risk) deversifiable and nondiversifiable
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Risk
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Value of risk
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operational risk-EBIT
Financial risk-how corp finances debt Interest rate risk-as the increase, stock $ goes down Inflation risk-real return |
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minimize by not buying in same industry
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correlation of returns
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a pooling of funds by different investors. put in stocks and everyone shares benefit of returns
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mutual funds
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moves w/economy (gdp)
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cyclical stock
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does not react much to changes in economy
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defensive stock
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fixed market basket of securities w/o having to go through a manager as in mutual funds
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index funds
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individual who advises what stocks to buy and sell
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stockbroker
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pick stocks, manages
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portfolio manager
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analyzes stocks advises portfolio manager and stockbrokers. watches particular stocks and sees what they are doing
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security analyst
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measure of relevant market risk
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beta
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based on expectations about future cash flows that come from stock. dividends and MP will increase.
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Stock valuation
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What are the 3 present value analysis
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timing, amount, and risk
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What is risk premium?
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the higher the more risky: = Ri-Rf
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tool to predict future value. look at Expected returns Rf+B(Rm-Rf) shows tha tone should have a well diversified stock portfolio
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capital asset pricing method
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price of stock at anytime reflects all aspects in reflection to all available info and current price; is best info of stock's fundamental value
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Efficient Markets Hypothesis
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looking at trends and does not believe market is efficient. where a stock is going is reflective of trends/patterns of past stock activity
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Technical stock analysis
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price is greater than fundamental value
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bubble
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implemented by Fed- change in money supply will affect economy
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monetary policy
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what are the tools of monetary policy?
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interest rates, open market operations, and required reserve ratio
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gov't efforts at manipulating economy. taxed and expenditures
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fiscal policy
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anything excepted in payment of debt
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money
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probability a person cant pay off debt
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default risk
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term structure of interest rates
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refers to long term rates gov't treasury bills are longer than short term. short term rates are higher. reflects maturity of yield gov't interest rates
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