Download Capital Markets: Stocks, Bonds, and Investment Strategies and more Exams Nursing in PDF only on Docsity! Economics Unit 3- Capital Markets capital - products such as machinery and equipment that are used in production capital market - where you go to buy the things you need for your product (different from a consumer market!) (ex: engines for Boeing, kitchen store for chefs) stock - (aka shares or equity) ownership of a piece of a company bond - (aka fixed-income security or debt security) an "IOU" issued by a borrower to a lender (includes IOU $ + interest i.e. coupon rate) investment/financial capital - stocks and bonds; provide the funds with which capital can be purchased dividend - the fixed annual amount paid to shareholders on each share of stock owned market capitalization (market cap) - the stock price multiplied by the number of shares of stock that are outstanding (aka?) Economics Unit 3- Capital Markets mutual fund - an investment tool that groups many different individual stocks or bonds into one entity; "task specialization" or "lazy investing;" doesn't require knowledge on specific stocks and co.'s global fund - a mutual fund that includes international investments specific fund - a mutual fund that focuses on a particular industry or part of the world socially responsible fund - a group of stocks or bonds of companies that meet specified requirements for ethical or environmental behavior index fund - a mutual fund that tries to match the performance of a broad market index load - the fees paid to the manager of a mutual fund front-end load - a fee that you pay when you purchase a mutual fund back-end load - a fee that you pay if you sell a mutual fund within a certain time frame Economics Unit 3- Capital Markets P/E ratio - ration of share price to company's earnings; expectations of a company's future success; if cost is above average, consumers have good expectations (too much= bubble); consumer expectations not always accurate Dow Jones - - 30 stocks - mostly heavy manufacturing - 500 stocks - Standard & Poors - more diverse than DJ - S&P 500 stock index - - Dow Jones and S&P 500 - requires knowledge of specific stocks and co.'s stock market - stock indexes, mutual funds, and risk; prices of stock change with consumer expectations of future prices, supply and demand, and size of market market efficiency - an investor cannot continually earn above normal profits Economics Unit 3- Capital Markets stock and bond market - - stocks and bonds can be complements or substitutes, depending on how much risk the buyer is okay with - stocks and bonds are assets (like a house or a car) international sector - industrial vs. developing countries; shows your country's global status interdependence - every country relies on another for other things; no country is completely isolated trade surplus - when imports are less than exports trade deficit - when imports are greater than exports net exports - the difference between the value of exports and that of imports; positive and negative effects public sector - -government spending -#1 household #2 government Economics Unit 3- Capital Markets #3 stocks and bonds budget deficit - when expenditures exceed budget/revenue revenue - comes from income taxes, social insurance taxes, and borrowing (selling of treasury bonds) incrementalism - cutting budget spending little by little uncontrollable expenditures - difficult to change; most afraid about; social security, medicine, medicaid, etc. Office of Management and Budget (OMB) - - President gets first crack at budget plan - budget plan draft due February - limited due to uncontrollable expenditures - Congressional Budget and Impoundment Act of 1974 sets budget deadlines to avoid budget disappearance; Congress (House + Senate) controls final budget Congressional Budget Office (CBO) - - issues authorization and appropriation bills
