Chapter 3

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Author:
npklemm
ID:
172884
Filename:
Chapter 3
Updated:
2012-09-23 21:11:05
Tags:
FIN 310
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Test Review
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  1. What is Descriptive Information?
    Presents factual data on the past behavior of the economy, market, industry, company, or given investment.
  2. What is Analytical Information?
    Presents projections and recommendations about potential investments based on available current data.
  3. What are the Types of Information?
    • 1.Economic and Current Event Information: Background and forecast data related to economic, political, and social trends.
    • 2.Industry and Company Info: Background and forecast data on specific industries and companies.
    • 3.Info on Alternative Investment Vehicles: Background and forecast data for securities other than stocks, bonds, and cash.
    • 4.Price Info: Price quotes on investment securities.
    • 5.Info on Personal Investment Strategies: Recommendations on investment strategies, or specific purchase or sale recommendations.
  4. What are Averages and Indexes?
    • Averages: reflect the arithmetic average price behavior of a representative group of stocks at a given point in time.
    • Indexes: measure the current price behavior of representative group of stocks in relation to a base value set at an earlier point in time.
  5. Calculation of DIJA:
    =(Closing share price of Stock 1 + Closing Share Price of Stock 2 + ... + Closing Share Price of Stock 30)/DIJA Divisor
  6. What is a Bond Yield?
    • Return an investor would receive on a bond if it were purchased and held to maturity.
    • Reported on Annual Basis.
  7. What are Stockbrokers and what do they do?
    • Act as an intermediate between buyers and sellers of securities.
    • Typically charge a commission to facilitate these securities transactions.
    • Must be licensed by both SEC and securities exchanges on which they place orders.
  8. What are Full-Service Brokers?
    • Traditional Broker.
    • Offers investors a full array of brokerage services: providing investment advice and infor, holding securities in street name, offering online brokerage services, and extending marginal loans.
  9. What are Premium Discount Brokers?
    • Focus primarily on making transactions for customers.
    • Charge low commissions and provide limited free research infoand investment advice.
  10. What are Basic Discount Brokers?
    • Called online brokers or electronic brokers.
    • Typically deep-discount brokers through which investors can execute trades electronically online via a commercial service.
  11. Types of Accounts:
    • 1.Single/Joint: Account either single or joint. Joint accounts most common between husband and wife or parent/child. Account of minor is called Custodial Account, parent or guardian must be part of all accounts.
    • 2.Cash/Margin: Cash - one which customer can only make cash transactions. Margin - account in which firm extends borrowing privileges to a creditworthy customer.
    • 3.Wrap: Allows customers with large portfolios to shift stock selection decisions conveniently to a professional money manager.
  12. Types of Orders:
    • 1.Market: Order to buy/sell stock at best price available at the time the investor places the order. 
    • 2.Limit: Order to buy at or below a specified price or to sell at or above a specified price.
    • 3.Stop-Loss: Broker tells market maker to sell stock when market price reaches or drops below a specified level.

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