Exam 1 Review 

Chapter 2

• asset types - money markets, bonds, and stocks/ equities

  • liquidity

  • time-frame

  • risk

  • money markets

    • • short term, low risk, highly liquid, cash and cash equivalents, low return

  • stocks - ownership in the company

  • bonds - debt or loans to the company

    • in event of bankruptcy - bondholders get paid first - loans from the public to the company

  • risk reward game based on types of assets

    • stocks are most risky

    • money markets are safest

• stocks vs. bonds

  • which of the reasons is why bonds are less risky

    • returns are more predictable

    • priority in default

    • obligation to pay out coupon payments

    • more predictable

• indexes

  • type

    • differentiates the type of weighted

  • price weighted

    • higher priced companies - more money into higher priced firms

  • market weighted

    • bigger companies - more money into bigger companies

  • market cap

  • equally weighted

    • same money invested in each class

  • differences

• derivatives

  • derived from other assets

  • options

    • coke - based on things that happen within the company

Chapter 3

• types of orders - how/ when would you use each of them

  • bid

    • buy

  • ask

    • sell

  • market order

    • current price

  • limit

    • stop limit

    • limit order - buys

• trading costs

  • traditional vs emotional

• tech advancements

  • algorithm trading

  • high frequency trading

  • globalization

    • investing internationally

  • tech advancement

    • people have more access to the market

    • more unknowledgable people trading in the stock market that make the market noisy

Chapter 4

• types of funds

  • etfs

    • trade throughout day - at any time

  • mutual funds

    • only trades at the end of the day

  • reits

• funds allocation

  • assets

  • bonds

  • International

  • sectors

  • targeted

• advantages of using an investment company

  • record keeping

  • diversification

  • reduces transaction costs

  • professional management

    • advice

• active vs passive

• fees

Chapter 6

market efficiency

• price inconsistently

• bahaviora