a. Your client is expected to ask why you are recommending the optimal complete
portfolio instead of the optimal portfolio even though the latter has a higher
expected return. How will you respond?
1. Why would individual investors want to inves
Jamie Acevedo FINC 561-91
1. What is the key difference between speculation and gambling?
Speculation is calculating risk and conducting research before entering a financial
transaction. A speculator buys or sells assets hoping to have bigger ga
Module 1 Introduction to Investment Environment
Securities Markets Introduction to Asset Classes
1. Key Data
a. Dow Jones weighted by price
b. S&P 500 weighted by market cap
c. 10 year treasury 30 year mortgage rates are priced based on the 10 year treasu
1. Asset classes
a. Money market instruments (safe)
i. Subsector of fixed income market
ii. Securities are very short term and liquid (1 year maturity or less)
iii. Money market mutual funds allow individuals to access money market
*CHAPTER 7 MONEY AND INFLATION*
1.1 What is a store of value? What types of assets act as a store of value?
accumulation of wealth holding dollars/other assets used to buy goods/services in the future
o EXAMPLE Shares of Apple Stock, Treasury Bonds, Rea
The Financial System
- Financial system The financial intermediaries and financial markets that together facilitate the
flow of funds from lenders to borrowers.
- The financial system channels funds from savers to borrowers.
o Households borrow to finance
Economists build models:
A.because theories cannot be related to the real world.
B.because they are more complex versions of reality.
C.in order to analyze every variable that could possibly influence a particular economic concept.
The primary function of the financial system is to:
A.control the money supply.
B.ensure economic growth.
C.regulate the stock market.
D.facilitate the flow of funds from lenders to borrowers.
A financial intermediary:
A.stores gold, silve
How Do We Know We Are In A Recession?
- Dates for recessions are determined by the National Bureau of Economic Research (NBER)
o Two consecutive quarters = recession
- NBER Business Cycle Dating Committee uses a broad range of factors and data to determin
Reserves are a bank_consisting of_
- Asset, vault cash plus bank deposits with the Federal Reserve
Which of the following represents the money supply?
- Money supply = money multiplier / (currency in circulation + reserves)
The purchase of treasury securi
CHAPTER 5 QUESTIONS
Why does the Fed have greater control over the monetary base than over the money
A. Because the Fed can control the monetary base through the required reserve ratio, but the Fed
has absolutely no influence on the money multipli
When You Enter The Job Market Can Matter A lot
- Job market entrants in 2005 had more employment opportunities.
Expanding labor force, low and falling unemployment
- Job market entrants in 2008-2011 had a much harder time.
Unemployment rate at highest l
Cobb-Douglas production function
A production function that takes the form
= capitals share in national income
1- a = labors share in national income
Constant returns to scale
A property of a production function such that if all inputs increase by t
o Business cycle Alternating periods of economic expansion and economic recession.
Labor productivity The quantity of goods and services that can be produced by one worker or by one
hour of work.