FIN 3507 Study Guide - Midterm Guide: Annual Percentage Rate, United States Treasury Security, Dividend Yield
Document Summary
Highlight = important for concepts on exam: real assets and financial assets. Real assets are used to produce goods and services and financial assets are claims on real assets or claims on real-asset income: agency cost: owners" interests may not align with managers" interests. Mitigating factors: performance-based compensation, boards of directors may fire managers, threat of takeovers. Goal is to minimize the agency cost with mitigating factors: investment process: asset allocation and security analysis. Security analysis is choosing specific securities within asset class: risk-return trade off. Higher returns mean higher risk: money market instruments: treasury bills; certificates of deposit; commercial. Paper; bankers" acceptances; eurodollars; repos and reverses; brokers" funds; Close to risk free but offers lower returns. Stock market very volatile and offers much higher return due to riskiness. Know available mmi, who issues it, long-term or short-term, usually one year: bond market: u. s. treasury bonds and notes.
