Investment Exam 1: Chapter 3

Market for new issues of securities

Market for already-existing securities

Primary offerings in which shares are sold directly to a small group of institutional or wealthy investors

First sale of stock by a formerly private company

Underwriters purchase securities from the issuing company and resell them to the public

A description of the firm and the security it is issuing

Craigslist

Real Estate Market

Markets in which traders specializing in particular assets buy and sell for their own accounts

A market where all traders meet at one place to buy or sell an asset

Buy or sell orders that are executed immediately at current market prices

Price the Investor sells at

Price the investor buys at

=(Ask price)-(Bid Price)

Brokers commision

Buy shares if and when they are price below a certain price

Sell if and when the stock price rises above a certain price

Stock is to be sold if price falls below a certain price

stock should be bought when its price rises above a certain price

An informal network of brokers and dealers who negotiate sales of securities

Computer-linked price quotation and trade execution system

3,000 firms listed

Computer networks that allow direct trading without the need for market makers

Deals personally in the market

Use of computer programs to make rapid trading decisions

Subset of algorithmic trading that relies on computer programs to make very rapid trading decisions

The portion of the purchase price contributed by the investor. The remainder is borrowed from the broker.

At least 50% of purchase price must be paid for in cash.

=Equity in Account/ Value of Stock

The sale of shares not owned by the investor but borrowed through a broker and later purchased to replace the loan

Profit=Initial Price - (Ending Price + Dividend)

% Margin = Equity/Value of stock owed

Nonpublic knowledge about a corporation possessed by corporate officers, major owners, or other individuals with privileged access to information about the firm

Financial intermediaries that invest the funds of individual investors in securities or other assets

Functions:

1. Record keeping and administration

2. Diversification and divisibility

3.Professional Management

4 Lower transaction costs

= (Market Value of Assets - Liabilities) / (Shares Outstanding)

Money pooled from many investors that is invested in a portfolio fixed for the life of the fund

A fund that issues or redeems its shares at net asset value

Shares may not be redeemed, but instead are traded at prices that can differ from net asset value

Sales commission charged on a mutual fund

Private investment pool, open to wealthy or institutional investors, that is exempt from SEC regulation and can therefore pursue more speculative policies than mutual funds

Annual fees charged by a mutual fund to pay for marketing and distribution costs

=(NAV1-NAV0 + Income and capital gain distributions)/ NAV0

The ratio of the trading activity of a portfolio to the assets of the portfolio

Offshoots of mutual funds that allow investors to trade index portfolios, can trade throughout the day