Test Flashcards

Which of the following enables the issue of shares by acting as a middleman in the transfer of funds between the company in need of financing and the general public?

Answer: Underwriter

Explanation: Underwriters determine how risky an insurer's business is. By appropriately valuing investment risk, underwriting aids in the establishment of fair borrowing rates for loans, the establishment of appropriate premiums, and the creation of a market for securities.

An ______ is a decentralized market in which members trade directly with one another rather than through a centralized exchange. It is made up of securities that are not traded on public markets.

Answer: Over-the-counter (OTC) market

Explanation: Buying and selling stocks outside of an established stock market is referred to as OTC (over-the-counter). Penny stocks, bonds, derivatives, ADRs, and currencies are examples of OTC investments. OTC markets are electronic networks that allow two parties to trade with one another without the use of a dealer-broker.

For the first time, new shares are issued and offered to the investing public in the ______ .

Answer: Primary market

Explanation: The primary market is where securities are formed in order to be offered for the first time to investors. Above all, the primary market allows firms, governments, and others to raise cash by issuing new securities on an exchange. Stocks, corporate or government bonds, notes, and bills are examples of securities issued through a primary market.

What does the acronym APR stand for?

Answer: Annual Percentage Rate

Explanation: The yearly interest created by a sum charged to borrowers or paid to investors is known as the annual percentage rate (APR). APR is a percentage that represents the actual annual cost of money over the course of a loan or investment. This includes any transaction fees or additional expenditures, but not compounding. Consumers can compare APRs between lenders, credit cards, and investment products since they provide a bottom-line number.

The is made up of exchanges and over-the-counter markets where publicly traded businesses' shares are issued and sold.

Answer: Stock market

Explanation: The stock market is a marketplace for investors to buy and sell investments, most often stocks, which are ownership shares in a publicly traded firm.

What is the definition of a bull market?

Answer: A market in which assets are rising or anticipated to be rising

Explanation: The state of a financial market in which prices are rising or are expected to rise is known as a bull market. The word "bull market" is most commonly associated with the stock market, although it may also be applied to any tradable asset, including bonds, real estate, currencies, and commodities.

What is the definition of GDP?

Answer: Gross Domestic Product

Explanation: The monetary worth of all finished goods and services produced inside a country over a given time period is referred to as the gross domestic product (GDP). GDP is a measure of a country's economic health that is used to calculate its size and rate of growth. GDP can be computed in three different ways: expenditures, output, and incomes.

What is the definition of liquidity?

Answer: The extent to which an asset or security can be acquired or sold without impacting its price in the market.

Explanation: The ease with which an asset, or security, can be changed into immediate cash without impacting its market price is known as liquidity. Cash is the most liquid asset, whereas tangible goods are less so. Market liquidity and accounting liquidity are the two most common types of liquidity.

What is the significance of your credit score?

Answer: It has an impact on how much money banks and credit card firms are ready to lend you.

Explanation: A credit score has complete control over financing rates, attractive mortgages, and an investor's negotiating power when applying for a loan. If you have negative credit or a low credit score, you can still invest in real estate, but it will affect potential investors and loan programs.