Balancing the Books
This income statement item represents the company's "bottom line".
What is Net Income?
A simple way to estimate the doubling time of an investment based on its annual rate of return.
What is the rule of 72?
This is the cost of borrowing money for a specified period.
What is the interest rate?
This is the practice of investing in multiple assets to diversify and control risk.
What is diversification?
This financial concept is used to put a value on any investment.
What is Present Value?
Securities that represent ownership in a corporation, giving the holder a claim on a portion of the company's assets and earnings.
What are stocks?
Assets = Liabilities + ______
What is Equity?
The current worth of a future sum of money or stream of cash flows given a specified rate of return.
What is Present Value?
A graphical representation of the relationship between bond yields and their maturities.
What is a yield curve?
This is a measure of a stock's volatility in relation to the overall market.
What is beta?
A method of valuing a company's stock price based on the theory that its stock is worth the PV of its future dividend payments.
What is the Dividend Discount Model?
The market where new securities are issued and sold to investors.
What is the primary market?
This financial ratio measures a company's ability to pay short-term obligations calculated as current assets divided by current liabilities.
What is the Current Ratio?
PV*(1+r)^n
What is future value?
Treasury securities that are indexed to inflation to protect investors from a decline in the purchasing power of their money.
What are Treasury Inflation Protected Securities (TIPS)?
A model that describes the relationship between systematic risk and expected return for assets
What is the Capital Asset Pricing Model (CAPM)?
This is the internal rate of return an investor earns on a bond relating price, coupons, and principal repayment.
What is the bond yield?
A market-capitalization-weighted index of 500 largest U.S. stocks.
What is the S&P 500 Index?
This financial ratio measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested.
What is Return on Equity?
A series of equal payments or receipts that occur at evenly spaced intervals.
What is an annuity?
A theory that suggests the long-term interest rate is an average of current and expected future short-term interest rates.
What is unbiased expectations theory?
This type of risk can be eliminated by diversification and is not compensated for.
What is firm-specify or idiosyncratic risk?
The yield of a callable bond assuming it is redeemed by the issuer at the first call date, calculated by equating the present value of the bond's coupons and call price to its current market price.
What is Yield to Call (YTC)?
Institution that helps raise capital and provides financial advice to governments & corporations.
What is an investment bank?
A method of performance measurement that breaks down return on equity (ROE) into three components: profit margin, asset turnover, and financial leverage.
What is DuPont Analysis?
An interest rate that is implied by the current spot rates for periods beginning in the future.
What is the forward or expected rate?
These are the two parts of the Federal Reserve's dual mandate.
What are price stability and full employment?
A theory stating that asset prices fully reflect all available information, making it impossible for investors to consistently outperform the market through stock selection or market timing.
What is the Efficient Market Hypothesis?
This is the fair value of a preferred stock that pays a $5 annual dividend, discounted at a 5% interest rate.
What is $100.
Optimal portfolios with the highest return for a given risk.
What is the efficient frontier?