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32 Cards in this Set

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