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Questions and Answers
Match the following investment types with their primary features:
Match the following investment types with their primary features:
REITs = Income from property values and dividends Certificates of Deposit (CDs) = Fixed interest rate for a set term Commodities = Investing in physical goods like gold or oil Stock Market = Platform for buying and selling shares
Match the following investment risks with their descriptions:
Match the following investment risks with their descriptions:
REITs = Subject to real estate market fluctuations Certificates of Deposit (CDs) = Low risk; typically insured by the government Commodities = Prices can be highly volatile Stock Market = Volatility and market risk
Match the following descriptions with the corresponding investment characteristics:
Match the following descriptions with the corresponding investment characteristics:
REITs = Often used for retirement planning CDs = Very safe but lower returns Commodities = Can act as a hedge against inflation Stock Market = Includes individual and institutional investors
Match the following terms with their liquidity characteristics:
Match the following terms with their liquidity characteristics:
Match the following participants in the stock market with their roles:
Match the following participants in the stock market with their roles:
Match the following advantages with their respective investment vehicles:
Match the following advantages with their respective investment vehicles:
Match the following concepts with their relevance to investment strategies:
Match the following concepts with their relevance to investment strategies:
Match the following investment types with their potential income sources:
Match the following investment types with their potential income sources:
Match the following types of Contractual Savings Institutions with their characteristics:
Match the following types of Contractual Savings Institutions with their characteristics:
Match the following investment types with their descriptions:
Match the following investment types with their descriptions:
Match the following pension plans with their definitions:
Match the following pension plans with their definitions:
Match the following characteristics of stocks with their risks:
Match the following characteristics of stocks with their risks:
Match the financial market term with its description:
Match the financial market term with its description:
Match the following characteristics of bonds with their risks:
Match the following characteristics of bonds with their risks:
Match the type of investor with their characteristics:
Match the type of investor with their characteristics:
Match the following characteristics with their types in investment products:
Match the following characteristics with their types in investment products:
Match the following types of insurance with their focus areas:
Match the following types of insurance with their focus areas:
Match the function of financial markets with its purpose:
Match the function of financial markets with its purpose:
Match the financial market participant with their description:
Match the financial market participant with their description:
Match the following examples of insurance products with their categories:
Match the following examples of insurance products with their categories:
Match the financial market terms with their relevance:
Match the financial market terms with their relevance:
Match the investment products with their stakeholders:
Match the investment products with their stakeholders:
Match the financial roles with their definitions:
Match the financial roles with their definitions:
Match the capital concepts with their impacts:
Match the capital concepts with their impacts:
Match the financial concepts with their definitions:
Match the financial concepts with their definitions:
Match the forms of Market Efficiency with their descriptions:
Match the forms of Market Efficiency with their descriptions:
Match the following financial terms with the correct examples or characteristics:
Match the following financial terms with the correct examples or characteristics:
Match the factors that influence common stock prices with their descriptions:
Match the factors that influence common stock prices with their descriptions:
Match the following terms related to stock market theories with their meanings:
Match the following terms related to stock market theories with their meanings:
Match the financial terms with their definitions:
Match the financial terms with their definitions:
Match the types of stock exchanges with their descriptions:
Match the types of stock exchanges with their descriptions:
Match the factors that impact stock prices with their descriptions:
Match the factors that impact stock prices with their descriptions:
Match the global stock exchanges with their locations:
Match the global stock exchanges with their locations:
Match the investment concepts with their characteristics:
Match the investment concepts with their characteristics:
Match the regulatory terms with their roles:
Match the regulatory terms with their roles:
Match the types of risk with their explanations:
Match the types of risk with their explanations:
Match the trading methods with their characteristics:
Match the trading methods with their characteristics:
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Study Notes
Capital Formation
- Capital formation involves accumulating and investing resources to create or expand physical assets and human capital.
- It requires mobilizing savings into productive uses.
Functions and Participants of Financial Markets
- Financial markets facilitate the trade of instruments like stocks, bonds, currencies, and derivatives.
- Individual investors buy and sell assets through brokerage accounts.
- Institutional investors, such as pension funds and insurance companies, invest large sums on behalf of clients.
Capital Allocation and Liquidity
- Capital allocation directs funds from savers to businesses or governments needing capital.
- Liquidity refers to how easily an asset can be turned into cash without affecting its market price.
Investment Products
- Stocks represent partial ownership of a company, offering high-risk, high-reward potential.
- Bonds are loans to companies or governments, characterized by lower risk and predictable income.
- Real Estate Investment Trusts (REITs) invest in property, providing income through dividends.
- Certificates of Deposit (CDs) have fixed interest rates and are low-risk, but offer lower returns.
Commodity Investments
- Commodities like gold or oil can provide a hedge against inflation but are subject to volatility.
Options and Futures
- Options give the right to buy/sell at a predetermined price, often used for speculation.
- Futures contracts agree to buy/sell at a future date, commonly involving leverage.
Stock Markets
- Organized Stock Exchanges (e.g., NYSE) have physical locations for transactions, while OTC exchanges operate via electronic systems.
- Global stock markets include major exchanges in the U.S., Europe, and Asia.
Factors Influencing Stock Prices
- Company performance, economic indicators, and market sentiment directly impact stock prices.
- Price appreciation allows investors to sell stocks at a higher price than purchase.
Dividends and Interest Income
- Dividends are profit distributions to shareholders, offering a steady income stream.
- Certain securities like preferred stocks provide fixed interest income.
Market Efficiency
- Efficient markets absorb all relevant information quickly, affecting stock prices.
- Efficient Market Hypothesis (EMH) includes three forms:
- Weak Form Efficiency: Prices reflect past trading data; technical analysis is ineffective.
- Semi-Strong Form Efficiency: Prices reflect all public information; fundamental analysis is ineffective.
- Strong Form Efficiency: Prices reflect all information, including insider data; insiders cannot profit excessively.
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