test 11 – Flashcard
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Herd behavior
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a kind of self-fulfilling behavior
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bear market
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a period when stocks decline in value
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time
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As a young college graduate, your biggest investment ally is this
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portfolio
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assets such as stocks, bonds, and real estate are considered to be the investor's
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political and regulatory risk
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Changes in the capital gains tax rate, or in the tax deductibility on municipal bonds are examples of this risk.
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Investment return MATH
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gain/basis = ROI% 9gain from sale & dividends) - basis = purchase price
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tax advantages
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capital gains are taxed at a lower rate than ordinary income
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Stockholders
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investors who may potentially receive dividends on their investments
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prospectus
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legal document that describes a securities issue and is made available to potential investors.
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real rate of return.
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nominal rate of return minus the inflation rate
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diverse portfolio
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owning stocks, bonds, real estate, gold coins, T-Bills, and gemstones
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investment
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purchasing an asset that generates a return
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speculation
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purchasing an asset whose value depends solely on supply and demand.
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financial risk
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risk associated with corporations who have filed for bankruptcy
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foreign bonds
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risks include inflation risk, interest rate risk, and exchange rate risk
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capital gain
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selling a machine or real estate or stocks for more than you paid
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par value
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stated amount on the face of a bond, which the firm is to repay at the maturity date
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ownership investments
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stock purchases rather than bond purchases
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maturity
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the date at which the bond issuer must repay the loan or borrowed funds
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liquidity risk
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the risk that you will not be able to find a buyer at a fair market price, and will have to sell for less than an asset's worth.
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exchange rate risk
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The variability in earnings that you might experience as the relationship between the euro and the U.S. dollar fluctuates is this risk
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cap gain tax rate
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These gains are taxed at 15%
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Preferred stock
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These stock holders receive dividend payouts before common stock holders do
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coupon interest
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This rate is the interest to be paid annually on a bond as a percentage of its par value.
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tax obligation date
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you owe capital gains taxes only after you sell the asset
