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56 Cards in this Set
- Front
- Back
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allocational efficiency
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the tendency of market prices to reflect all information affecting the underlying value of securities
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asked price
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the price a dealer charges when selling to the public
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auction market
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a market where buyers and sellers bargain directly with each other
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bid-asked spread
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the difference between the price a dealer is willing to pay for a security (bid price) and the price at which the dealer is willing to sell the security (asked or offer price)
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bid price
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the price a dealer will pay when buying from the public
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brokered market
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a market where a person (or institution) called a broker is employed to find the other side of the trade
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dealer
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an institution or individual acting as a market-maker by continuously quoting bids and offers on a security with the objective of earning a profit on the bid asked spread
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dealer market
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a market wehre a specialized trader called a dealer or market-maker continuously quotes bid and offer prices
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investment bank
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financial institutions whose central activity is originating securities in the primary market but often also engage in securities market making, brokering, trading and advisory services
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liquid
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ability to convert an asset into cash quickly with little loss in value
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marketability
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the ease of buying and selling ans asset, associated with narrow bid asked spreads
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market-maker
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an institution or individual acting as a dealer by continuously quoting bids and offers on a security, with the objective of earning a profit on the bid asked spread
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NASDAQ
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(National Association of Securities Dealers Automated Quotation System) a computerized system for displaying bid and asked prices for over the counter stocks
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National Association of Securities Dealers (NASD)
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an association of securities dealers to whome the Securities and Exchange Commission has delegated oversight of the over the counter equities market
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offer price
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the price a dealer charges when selling to the public
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operating efficiency
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the effectiveness with which markets bring together buyers and sellers
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over-the-counter (OTC) market
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trading in stocks, usually of smaller companies, that are not listed on one of the stock exchanges. Also refers to how government and corporate bonds are traded, that is through dealers who quote bids and offers to buy and sell "over the counter"
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par
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face value of a financial asset, especially a bond (often equal to 100)
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primary market
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the financial market for the purchase and sale of stocks or bonds when they are first issued
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secondary market
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a financial market in which priviously issued securities are traded, such as the New York Stock Exchange
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Securities and Exchange Commission (SEC)
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a federal agency that regulates securities brokers and dealers and securities markets
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specialist
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a dealer who makes a market in stocks traded on an organized exchange and who is also responsible for matching public buy and sell orders in an auction format
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thin market
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a market with low trading volume
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underwriting
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the process by which a newly issued security is sold to the public
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underwriting spread
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the fee earned by an investment bank or other financial institution for marketing a newly issued security
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Who buys and sells securities continuously? security buyer? security seller? security dealer? auctioneer? underwriters?
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security dealer
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In a world of uncertainty what kind of people are there?
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Risk averse
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What are tombstones?
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Successful underwritings. Underwritings are newly issued stocks sold to the public.
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How are interest rates determined?
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Supply and demand
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What does an investment banker specialize in?
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Primary securities
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Who buys and sells securities continuously? security buyer? security seller? security dealer? auctioneer? underwriters?
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security dealer
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In a world of uncertainty what kind of people are there?
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Risk averse
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What are tombstones?
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Successful underwritings. Underwritings are newly issued stocks sold to the public.
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How are interest rates determined?
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Supply and demand
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Who buys and sells securities continuously? security buyer? security seller? security dealer? auctioneer? underwriters?
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security dealer
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What does an investment banker specialize in?
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Primary securities
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In a world of uncertainty what kind of people are there?
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Risk averse
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What are tombstones?
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Successful underwritings. Underwritings are newly issued stocks sold to the public.
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How are interest rates determined?
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Supply and demand
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What does an investment banker specialize in?
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Primary securities
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How do financial institutions acquire funds?
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Issue stocks and bonds
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What has the largest and the most assets?
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commercial banks
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Who is the largest lender in the financial system?
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Financial institutions
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What happens during a recession?
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Interest rates go up and bond prices fall.
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How do you calculate percentage yield?
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Face value/yield
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What are state and local government bonds?
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municipals
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What is adjusted for inflation? nominal interest rate or real interest rate?
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Real interest rate
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nominal interest rate
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measures the increment in dollars as a percent of dollars loaned out ($10/$100)
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real interest rate
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measures the increment in purchasing power as a percent of purchasing power loaned out ($4/$100) (In a nutshell, the real interest rate is the nominal interest rate minus the inflation rate)
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What is the equation for the annual return on a bond?
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selling price - purchase price + coupon/ purchase price
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What is the difference between primary securities and secondary securities?
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Primary are newly issued stock secondary are stock market trading.
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What is unit banking?
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Unit banking is a bank with one branch.
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Simple interest? Compound interest?
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Simple interest is charged on almost everything. Compound interest is compounded over time.
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What are the two things governments fear?
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Unemployment and inflation Inflation causes unemployment.
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What are the three main functions of money
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1. means of payment 2. storage of value 3. unit of account
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How do commercial banks control the accounting aspect?
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Maintaining financial records.
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