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