Investment correct answers sacrificing something of value now, to receive a benefit from that sacrifice in the future
Real Assets correct answers physical property like gold, machinery, equipment, or real estate
Financial Assets correct answers claims on real assets or the income generated by...
FINC 3640 Exam 1 || with 100% Correct Answers.
Investment correct answers sacrificing something of value now, to receive a benefit from that
sacrifice in the future
Real Assets correct answers physical property like gold, machinery, equipment, or real estate
Financial Assets correct answers claims on real assets or the income generated by them (Stocks
and Bonds)
Success and failures of the financial assets we choose to purchase ultimately depend on the real
assets correct answers
Money-Market correct answers the short-term (1 year or less) debt security market. Examples
include commercial paper, CD's, T-bills.
Capital-Market correct answers includes long-term fixed income securities like treasury bonds,
muni bonds, and corporations, as well as equities
Derivatives correct answers any financial asset whose value is derived from the value of some
other "underlying" asset
can be used to hedge or transfer risk
Consumption Timing correct answers focuses on how to shift purchasing power from times of
high earnings to time of low earnings. this can be done by buying stocks and bonds during high
earnings and selling them during low earnings seasons when cash is tight
know about Agency Problem and how to mitigate this issue correct answers
Asset Allocation correct answers choice among the broad asset classes
this is the primary determinant of a portfolio's return
Capital Allocation correct answers the choice between risky and risk-free assets
Complete Portfolio correct answers the risk-free asset and the risky portfolio combined
Security Selection correct answers choice of specific securities within each asset class
Firms are net borrowers, households are net savers, governments can be net borrowers or lenders
correct answers
American Depository Receipts (ADRs) correct answers Certificates traded in the U.S.
representing ownership in foreign security
, Pass-Through Securities correct answers Pools of loans (such as home mortgage loans) sold in
one package. Owners of pass-throughs receive all of the principal and interest payments made by
the borrowers (Ex. MBS)
Mutual Funds correct answers pool the money of individual investors and purchase a wide
variety of securities on their behalf
T-bills correct answers pure discount bonds with original maturity of one year or less. highly
liquid. Only taxed at federal level
Bank Discount Method correct answers means that the bill's discount form par value is
"annualized" based on a 360 day year, and then reported as a percentage of par value
two flaws: assumes there is only 360 days in a year, and computes the yield as a fraction of par
instead of the price the investor paid
Bond Equivalent Yield correct answers A calculation of yield that is annualized using the ratio of
365 to the number of days to maturity. Bond equivalent yield allows for the restatement and
comparison of securities with different compounding periods.
Certificate of Deposit (CD) correct answers A time deposit with a bank. Time deposits may not
be withdrawn on demand. The bank pays interest and principal to the depositor only at the end of
the fixed term of the CD.
Interest Type: add on
Commercial Paper correct answers short-term unsecured debt issued by large corporations
directly to the public.
Interest Type: discount
Fed Funds correct answers funds in the bank's reserve accounts. banks often lend to each other
on an overnight basis based on the fed fund rate.
Fed Funds Rate correct answers interest rate on very short term loans between banks
LIBOR correct answers rate at which banks in London (and elsewhere) are willing to lend to
other banks
yield to maturity correct answers the rate of return a bondholder will receive if the bond is held
to maturity. accounts for both coupon payments and spread between purchase price and price at
maturity ($1,000)
TIPS correct answers inflation adjusted T-bonds. the principal increases with the amount the CPI
increases. provide constant stream of income in real, inflation adjusted dollars.
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller FullyFocus. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.99. You're not tied to anything after your purchase.
