Cheatography
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Basic notes of the current module that I'm studying, Securities and Markets.
This is a draft cheat sheet. It is a work in progress and is not finished yet.
Chap 1
1. What is risk? |
Uncertainty of the outcome which cannot be avoided |
2. What is return? |
Amount of money received by an investment |
3. What is the relationship between risk & return? |
Directly related. The greater the risk, the higher the return. |
4.What is Price? |
Current price in which an asset/services/product can be bought |
5. What determines price? |
a. Time value of money |
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b. risk premium |
6. Pricing Mechanism in different types of Markets: |
a. Markets in goods &services |
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b. labour market |
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c.Financial Market - (credit, securities) |
7. Who sets base rate? |
Central Bank |
8. Who sets other interest rate? |
Market Forces |
9. What is the relationship between interest rate and bond prices? |
When interest rates go up, bond prices fall in order to have the effect of equalizing the interest rate on the bond with prevailing rates, and vice versa. |
10. Why do you think a Central Bank may raise interest rate? |
inflation,to reduce economic activity |
11. advantages and disadvantages of doing so: |
Adv: encourage savings? |
12. Life cycle hypothesis. |
a. early stages: income is 0 as they are unemployed. |
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b. once employed, income will rise year by year |
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c. income will fall to 0/ close to 0 if they are unemployed, ill for a long period of time |
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