Lernkarten

Karten 20 Karten
Lernende 0 Lernende
Sprache English
Stufe Universität
Erstellt / Aktualisiert 23.01.2022 / 23.01.2022
Lizenzierung Keine Angabe     (Leipzig University)
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0 Exakte Antworten 20 Text Antworten 0 Multiple Choice Antworten
Fenster schliessen

Money Markets vs. Capital Markets

Money Markets: the organized exchange on which participants can lend and borrow large sums of money for a period of one year or less

Capital Markets: long-term investing where issuing and trading stocks/bonds 

Money markets + capital markets = financial market 

Fenster schliessen

Single Tier vs. Two Tier Corporate Structure 

Single Tier: shareholders elect CEO; CEO reports to shareholders (more informal arrangement)

Two-Tier: institutionalized shareholder and supervisory body elect CEO; CEO reports to board of directors

 

Fenster schliessen

A corporate bond entails which rights for an investor?

  • a debt obligation (bond)
  • semi-annual coupon payments; upon a coupon rate until bond expires
  • upon expiration = face value is paid back 
  • paid back before shareholders: bonds are lower risk than equity 
Fenster schliessen

How can a corporate bond be valued? 

1. calculate cash flows as per coupon rate per annum 

2. calculate present value, using discount rate (PV = cash flow / 1 + discount rate) 

3. add the new sum over time  to find bond price today 

Fenster schliessen

Explain the difference between a spot and a forward interest rate. 

 

  •  Spot is today's interest rate (T=0)
  • Forward Interest Rate: is the future interest rate 
Fenster schliessen

Imagine you are a long-term stock investor. Should you care about the resale price of the stock when it comes to valuing the stock today? Explain. 

  • resale price will not reflect the real value of the stock
  • daily stock prices can be volatile 
  • better to consider the sum of present values of the future dividents 
    • it is impossible to forecast future dividents but one can try using past/present information 
Fenster schliessen

Discuss and explain the main assumptions, the derivation and the results of the Markowitz Portfolio Theory verbaly and by the use of a graph. 

  • x axis: standard deviation %; y axis: expected returns
  • Graph
    • the efficient frontier shows the portfolios with the highest return for a given risk / or lowest risk for a given return
    • efficient portfolios are on the line
  • Result - diversify your stock portfolio to reduce systematic risk 
    • covariance suggests the correlation between stocks; which reduces with a diversified portfolio
  • Assumptions
    • everyone is an return risk optimizer (looking for highest return related to lowest risk)
    • higher risks = higher returns 
Fenster schliessen

Explain the difference between primary and secondary equity markets

 

  • primary markets for private placements, intial public offerings (IPOs and warrants 
  • secondary markets involve stock exchanges and are the primary venue for public investment in corporate equity