FINC412- Midterm Exam Guide - Comprehensive Notes for the exam ( 14 pages long!)
12 Oct 2017
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Financial markets - where securities are traded by the original owner or other trader, accommodating corporations and investor needs. Surplus spending units > financial market > deficit spending unit. Security: source of funds for one side of the investment, and a use of funds for the other side. Debt security: security that evidences someone borrowed money (ex: Money market security: has a maturity of less than 12 months: highly liquid, low returns. Capital market security: has a maturity of more than 12 months: bonds, mortgage - (real estate) Mortgage backed securities: taking mortgages and bundling them up and selling them in the secondary market. Derivative security: gets its value from another security (asset) in the market. Can be used for speculation or risk management (ex: Forwards/futures: the value of a security, all things equal is the present value of cash flows. Market value: price you sell your security at. Primary market: securities where the issuing entity gets the earnings (ex:
