Foundations of Business Chapter 10 TCU Ackall – Flashcards
Unlock all answers in this set
Unlock answersquestion
financial markets
answer
markets that transfer funds from savers to borrowers
question
savers
answer
individuals and organizations willing to defer using some of their income to earn a financial return and build their wealth)
question
borrowers
answer
individuals and organizations that need additional funds to achieve financial goals
question
depository institutions
answer
financial intermediaries that obtain funds by accepting checking and savings deposits from individuals, businesses, and other institutions and then lending those funds to borrowers
question
commercial banks
answer
the most common depository institutions
question
loans
answer
at the start of 2014, over half of total bank assets were in the form of ____
question
credit unions
answer
depository institutions that are organized as a cooperative, meaning that they are owned by their depositors
question
savings and loan association
answer
a depository institution that has traditionally obtained most of its funds by accepting savings deposits, which have been used primarily to make mortgage loans
question
institutional investors
answer
don't accept deposits but amass huge pools of financial capital from other sources and use these funds to acquire a portfolio of many different assets
question
securities broker
answer
a financial intermediary that acts as an agent for investors who want to buy and sell financial securities. brokers earn commissions and fees for the services they provide
question
securities dealer
answer
a financial intermediary that participates directly in securities markets, buying and selling stocks and other securities for its own account
question
investment banks
answer
financial intermediaries that help firms issue new securities to raise financial capial
question
federal reserve act of 1913
answer
the law that established the federal reserve system as the central bank of the united states
question
banking act of 1933
answer
the law that established the federal deposit insurance corporation (FDIC) to insure bank deposits. It also prohibited commercial banks from selling insurance or acting as investment banks
question
securities act of 1933
answer
the first major federal law regulating the securities industry. it requires firms issuing a new stock in a public offering to file a registration statement with the SEC
question
securities and exchange act of 1934
answer
a federal law dealing with securities regulation that established the securities and exchange commission to regulate and oversee the securities industry
question
securities and exchange commission
answer
the federal agency with primary responsibility for regulating the securities industry
question
insider trading
answer
the practice of using inside information to profit unfairly from trading a company's securities
question
financial services modernization act of 1999
answer
an act that overturned the section of the banking act of 1933 that prohibited commercial banks from selling insurance or performing the functions of investment banks
question
sarbanes-oxley act of 2002
answer
included provisions to ensure that external auditors offered fair, unbiased opinions when they examined a company's financial statements
question
dodd-frank act of 2010
answer
expanded the fed's regulatory authority over nondepository financial institutions, such as hedge funds and mortgage brokers that had previously operated with little regulatory oversight or accountability. also created the financial stability oversight council
question
common stock
answer
the basic form of ownership in a corporation
question
dividends
answer
a distribution of earnings to the corporation's stockholders
question
capital gain
answer
the return on an asset that results when its market price rises above the price the investor paid for it
question
preferred stock
answer
a type of stock that gives its holders preference over common stockholders in terms of dividends and claims on assets
question
bond
answer
a formal debt instrument issued by a corporation or government entity
question
maturity date
answer
the date when a bond will come due
question
par value
answer
the value of a bond at its maturity; what the issuer promises to pay the bondholder when the bond matures
question
coupon rate
answer
the interest paid on a bond, expressed as a percentage of the bond's par value
question
current yield
answer
the amount of interest earned on a bond, expressed as a percentage of the bond's current market price
question
covertible security
answer
a bond or share of preferred stock that gives its holder the right to exchange it for a stated number of shares of common stock
question
financial diversification
answer
a strategy of investing in a wide variety of securities in order to reduce risk
question
mutual fund
answer
an institutional investor that raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many different securities
question
net asset value per share
answer
the value of a mutual fund's securities and cash holdings minus any liabilities, divided by the number of shares of the fund outstanding
question
exchange traded fund (ETF)
answer
shares traded on securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities
question
primary securities market
answer
the market where newly issued securities are traded. the primary market is where the firms that issue securities raise additional financial capital
question
secondary securities market
answer
the market where previously issued securities are traded
question
public offering
answer
a primary market issue in which new securities are offered to any investors who are willing and able to purchase them
question
private placement
answer
a primary market issue that is negotiated between the issuing corporation and a small group of accredited investors
question
initial public offering (IPO)
answer
the first time a company issues stock that may be bought by the general public
question
underwriting
answer
an arrangement under which an investment banker agrees to purchase all shares of a public offering at an agreed-upon price
question
registration statement
answer
a long, complex document that firms must file with the SEC when they sell securities through a public offering
question
accredited investor
answer
an organization or individual investor who meets certain criteria established by the SEC and so qualifies to invest in unregistered securities
question
stock (or securities) exchange
answer
an organized venue for trading stocks and other securities that meet its listing requirements
question
market makers
answer
securities dealers that make a commitment to continuously offer to buy and sell the stock of a specific corporation listed on the NASDAQ exchange or traded in the OTC market
question
over-the-counter (OTC) market
answer
the market where securities that are not listed on exchanges are traded
question
electronic communications network (ECN)
answer
an automated, computerized securities trading system that automatically matches buyers and sellers, executing trades quickly and allowing trading when securities exchanges are closed
question
market order
answer
an order telling a broker to buy or sell a specific security at the best currently available price
question
limit order
answer
an order to a broker to buy a specific stock only if its price is below a certain level, or to sell a specific stock only if its price is above a certain level
question
stock index
answer
a statistic that tracks how the prices of a specific set of stocks have changed
question
Dow Jones industrial average (DJIA)
answer
an index that tracks stock prices of thirty large, well-known US corporations
question
standard & poor's 500
answer
a stock index based on prices of 500 major US corporations in a variety of industries and market sectors
