1. Financial Markets
Financial Assets-claim on the property or income of the borrower
Financial Intermediary-institution that helps channel funds from savers to borrowers---banks, finance companies, life insurance, pension
Mutual Fund-pools the savings of many and invests in a variety of stock/bonds, ect

2. More Terms Diversification-spreading your investments
Portfolio-a collection of financial assets
Prospectus-an investment report to potential investors
Return-$ an investor receives above and beyond the sum initially invested

3. Bonds Low Risk Investments
Gov’t or corps repay the investor a fixed amount of interest at regular intervals
Coupon Rate-interest rate that the issuer will pay the holder
Maturity-the time at which payment is due
Par Value-face value or principal
Yield-annual rate of return

4. Bond Ratings AAA-Highest grade AA-High Grade BBB-Upper Medium
BB-Lower Medium
B-Speculative
CCC-Vulnerable to Default
CC-Debt rated
C-In debt
D-In default

5. Types of Bonds
Savings Bonds-buy a bond get the return a the maturity date
Treasury Bonds, Bills and Notes (T-Bills)
Municipal Bonds-Finance internal improvements-roads, schools
Corporate Bonds-Big Time $$-at least 10k
Junk bonds-Cheap, high risk but can offer high returns

6. Other Types
CD’s-certificates of deposit
Money Market Funds

7. The Stock Market
Benefits-
Dividends
Capital Gains

8. Types of Stock Income Stock-dividends at regular times during the year
Growth Stock-no dividends-reinvest
Common Stock-voting members
Preferred Stock-don’t vote but get dividends before others

9. Stock Splits Each single share splits into more than one share Why?
Price becomes so high that others wont buy more
Encourages new investors

10. Risks + Trading Firm may earn lower profits Smaller dividends
Price may decrease
Stockbrokers
Brokerage Firms-charge fees for all business

11. Charles Schwab
Big Time Broker

12. Stock Exchanges Markets for buying stocks NYSE
Largest market
Only large well established companies (Blue Chip)
NASDAQ-gets lots of the other stocks
Over the Counter

13. Futures and Options Futures Options
Contracts to buy or sell in the future-pay some now the rest later
Options
A choice to buy or sell at a fixed price for a limited time
Call Option-to buy
Put Option to sell
Daytrading-make dozens of trades a day hoping to earn profit

14. Measuring Stock Performance

15. Measuring Stocks
Dow Jones Industrial Avg—measures the ups and downs (daily) of30 large companies
S&P 500-measures 500 companies
Bull Market-Rising
Bear Market-Falling