65 Cards in this Set
| Front | Back |
|---|---|
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Key feature of MM security?
|
Hold less than a year
|
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6 money market securities?
|
Treasury Bill Repurchase agreement (repo)
Commercial Paper Federal Funds
Certificate of Deposit Banker’s Acceptance
|
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What are the 3 treasuries and their maturities?
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1. T-bill <1 year
T-note 1-10 years
T-bond 10+ years
|
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Treasuries have coupons?
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No coupons bought at a discount
|
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Coupons are paid (on all bonds)?
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Semiannually
|
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Cost for t-bill is called?
|
Par value (bought 995 to 1000 a year later)
|
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What are unsecured notes also known as?
|
Commercial paper
|
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Why are commercial paper 270 days or less?
|
Don’t have to register with the SEC
|
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Why need for commercial paper?
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keep up with cash flow
|
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What firm went bankrupt and couldn’t pay its commercial paper?
|
Lehman brothers
|
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What is the rate banks loan to each other?
|
Federal Funds rate
|
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What is used for foreign trade transactions?
|
Banker’s acceptance
|
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What is a repo (repurchase agreement) used for?
|
So the Fed (and participating companies) can add money to the money supply (when they buy back at a higher rate)
|
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Which bank failed to pay repurchase agreement?
|
Bear Stearns
|
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What are bonds?
|
Investment in debt
|
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Who issues treasury bonds?
|
1. Federal government
|
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1. Treasury bonds bought at (dutch) auction:
|
Competitive bidding-submit a bid(therefore interest rate makers)
Non-competitive bidding-tell how much they want(therefore take the IR)
|
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What are IO/PO strips from treasury bond?
|
1. IO-interest only
PO- principal only
|
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Municipal bonds
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1. county government bonds TAX EXEMPT (yields less)
They have more default risk b/c they must raise taxes (can’t print money)
|
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Junk bond
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lower-rated company or start-up (high risk higher yield)
|
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4 types of bonds?
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1. U.S. treasury, federal agency (mortgage fanny mae), municipalities, corporation
|
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Corporate bond
|
unsecured-no asset
Secured-backed by asset
|
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Call provision?
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IR goes down, they can recall bonds
|
|
Protective covenant?
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Ex. Won’t issue extra stock, limit bonuses to management
|
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Corporate bonds are ___ yield than treasury?
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Higher
|
|
Fed agency bonds are?
|
Mortgages bought by fannie mae and Freddie mac
|
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Bearer bond?
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Coupon physically attached to bond so whoever holds bond is owner
|
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What is a stock?
|
An investment in equity
|
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How often are dividends paid?
|
Quarterly
|
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Margin trading?
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buying stock with borrow money (debt) why? Higher return
|
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Margin call?
|
Put more cash in account for collateral because it’s gone down in value
|
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Market order
|
current market price
|
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Limit order
|
set own price, but might not get it bought at that price
|
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Short-selling?
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Betting on price going down and selling others’ stock so must buy it back
|
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Ask price?
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sell at current price
|
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Bid price?
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buy at current price
|
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IPO?
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First issue of stock
|
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Secondary issue?
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More stock issue = diluted so price goes down
|
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Repurchase of stock?
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Increase stock value
|
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Flipping?
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Buy asset and sell relatively quickly for profit
|
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Flip after IPO?
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Makes price go down
|
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stops flipping IPO?
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Lock-up provision
|
|
Preferred shareholders?
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Get paid dividend first
|
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Common shareholders?
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Have voting rights
|
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Circuit breakers?
|
Cease trading on whole industry
|
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Trading halt?
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Stoppage of trade on a particular stock
|
|
Mutual fund?
|
Invest money for you
|
|
Mutual funds are open ended?
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Meaning can issue shares whenever
|
|
How often mut fund priced?
|
Once daily
|
|
What is name of price (mut fund)?
|
NAV
|
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Why invest in mut fund?
|
diversify
|
|
Problems with mutual funds?
|
Load fee –front-end=pay upfront, back-end=pay after
|
|
ETF-
|
traded between investors, less diversified, based on sectors (ex. Energy)
|
|
why etf
|
less fees
|
|
REIT?
|
1. Real estate investment trust
· Mortgage REIT-mortgages and MBS
· Equity-property is asset
· Hybrid REIT-prop and mort
|
|
Hedge fund?
|
Less transparent/regulation, need millions to enter, can’t exit at any time, management fee and 20% profit incentive
|
|
What are the 4 types of savings bonds?
|
1. EE-30,HH-20,I-inflation indexed, patriot-military spending
|
|
Which is more risky: stock or bond?
|
Bond b/c company can default on bond
|
|
Dividends
|
1. raise=good for investor; lower=bad b/c cash flow receding; same= good b/c stable with no new cost
|
|
In 2004 DJIA(?) dropped:
|
1. dropped: Alcoa, Bank of America, Goldman-Sachs
Added: Nike, Visa, Goldman-Sachs
|
|
ask
bid
|
ask-sell
bid-buy
|
|
Money market fund-
|
invest in short-term debt (ex. treasury bill or commercial paper)
|
|
What is money market’s risk?
|
1. Term-tie money up (no); liquidity-highly liquid(no) IR-no b/c year or less; default-yes
|
|
Short sell
|
1. selling stock hoping price drops
|
|
Mutual fund types
|
specialty-oil, transportation; index fund-s&p 500; multifund-invests in other mutual funds; tax-free-municipal bonds
|
FI 301: EXAM 1