Knowledge Flashcards

Which regulatory body oversees the securities markets and has broad authority to enforce federal securities laws?

Answer: SEC

The SEC (Securities and Exchange Commission) is the primary federal regulator with broad authority to enforce securities laws.

A bond that pays no periodic interest but is issued at a discount to face value is called a:

Answer: Zero-coupon bond

Zero-coupon bonds make no periodic interest payments and are sold at a discount, with the investor earning the difference at maturity.

Which of the following is considered a money market instrument?

Answer: Commercial paper

Commercial paper is a short-term unsecured debt instrument issued by corporations, making it a money market instrument.

The process by which a company first sells shares to the public is known as a(n):

Answer: Initial public offering (IPO)

An IPO is when a company sells its shares to the public for the first time, transitioning from a private to a public company.

When interest rates rise, what happens to the price of existing bonds?

Answer: Bond prices fall

Bond prices and interest rates have an inverse relationship; when rates rise, existing bonds with lower rates become less attractive, so their prices fall.

Which type of order guarantees execution but not price?

Answer: Market order

A market order guarantees execution at the best available current price but does not guarantee a specific price.

A mutual fund that trades on an exchange throughout the day like a stock is called a(n):

Answer: Exchange-traded fund (ETF)

ETFs are investment funds that trade on stock exchanges throughout the trading day, unlike mutual funds which are priced once daily at NAV.