stock market

Card Set Information

stock market
2013-04-13 00:58:08

Show Answers:

  1. Define Random Walk Theory
    theory that claims that market prices follow a random path up and down, without any influence of past price movements
  2. Define Efficient Market Theory 
    theory that all market participants receive and act on all of the relevant info as soon as it becomes available
  3. Who issues bonds and why?
    The federal government and agencies do in order to borrow funds
  4. How does the coupon of an existing bond fluctuate with interest rate?
    It doesn't, coupons are fixed when they are issued
  5. How does the price of an existing bond fluctuate with interest rate?
    Inversely, when the interest rates go up, the price of bonds go down because of fixed coupons.
  6. How does a zero-coupon bond earn any return?
    Because it sells at a discount rate and the return is built into the price appreciation over its term
  7. Which of the following will have the highest yield and why? Treasury Bill, Treasury Bond, AA Corporate Bond, Ba Corporate Bond, New Jersey Dormitory Bond.
    The Treasure Bill
  8. What is a derivative?
    A financial asset whose value derives from another, underlying asset
  9. What is a futures contract?
    A contract that requires the purchase or sale of a standardized commodity at a specific date in the future at a price set today 
  10. what is a call option?
    the option to buy in the future up to an expiration date, at a price set today
  11. What is a put option?
    option to sell
  12. What is an option contract?
    contracts that allow purchase or sale of security at specified price within specified period of time set today at discretion of option holder, option is not required