chapter 15 Personal Finance

networks are computer systems that match desired purchases and sales of stocks. They receive and buy and sell stocks. What are electronic communications networks
??? How is the market for a stock created?
The two types of firms are discount brokerage firm is a brokerage firm that executes your desired transactions but does not offer investment advice. The other type is a full-service brokerage firm which is a brokerage firm that offers investment advice and executes transactions. Types of brokerage services
they have real time updates, the charge per transaction is low, and it’s convenient and easy What are some advantages of using online brokerage services
To set up an account, go to the website and set up an account. Then send a check so you can purchase stocks. Describe how an investor would set up and use an online brokerage account
know the name of the stock, whether you want to buy or sell, the number of shares you want, and the market order/limit order. What information must you provide when placing an order to buy or sell stock
A ticker symbol is the abbreviated term used to identify a stock. What is a ticker symbol
Round lot are shares that are bought or sold in multiples of 100. Odd lot are less than 100 shares of a stock What do the terms round lot and odd lot mean in stock transactions
an order to buy or sell a stock at its prevailing market price. What is a market order
an order to buy or sell a stock inly if the price is within limits that you specify What is a limit order
an order to execute a transaction when the sotck price reaches a specified leve What is a stop order
purchasing a stock with a portion of the funds borrowed from a brokerage firm What is buying a stock on margin
you may get a margin call to increase the cash in your account to bring the margin back to minimum level What happen if stocks bought on margin decline?
Some investors achieve high returns this way, but it’s risky What are some advantages of stocks bought on margin
to assess its future performance Why is it necessary to analyze a firm
reports standardized financial performace and expected performance. Also may have financial statements. What is an annual report
analyzes a firm’s sources of funds and how it has invested its funds. An income statement measures a firm’s revenues, expenses, and earnings. List the characteristics of a firm that investors analyze by sing a balance sheet and income statement
are evaluated according to how a firm’s value changes over time. Why may top managers of a firm be tempted to use misleading estimates of revenues and expenses
They want to increase the value of their firm, so that they can sell their shares at a high price and earn a high level of compensation How do managers boost reported earnings of their firm
13. When analyzing economics in stocks, they analyze economic growth, impact of international economies, and inflation When performing an economic analysis of a stock, what economic factors are most closely watched
measured by gross domestic product (GDP) which is the total market value of all products and services produced in a country Explain how economic growth is measured
The government’s fiscal olicy is the means by which the U.S. government imposes taxes on individuals and corporations and by which it spends its money. How does economic growth affect stock prices?
Low interest rates cause stocks to do better. The Federal Reserve Board uses monetary policy to adjust the supply of funds in the economy and influence interest rates. Interest rates affect economic growth and therefore have an indirect impact of stock prices How do interest rates affect economic growth.
increase in the general level of prices of products and services over a specified period. What is inflation
measured by the consumer price index (CPI) and the producer price index (PPI) How is inflation measured?
it allows you to assess a firm’s future performance and decide whether or not to buy that stock. You can use Bloomberg.com or yahoo finance to analyze an industry. Why is an industry analysis of stocks important
a process by which investors sell a stock that they do not own. This would be used to sell a stock that is overvalued in their opinion. What is a short sale? When would this strategy be used?
If another country has a weak or strong economy, it affects the imports and exports we have with that country. These imports and exports influence our economy. How can another country’s economic conditions impact a U.S. firm and its stock

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