Introduction to Finance

continued 
)
firms, careers, 17
introduction to, 163–164
research analyst, career, 16
return, calculation, 221
saving, relationship, 169–170
savings, movement, 23–25
United States, 170
t
Investment bankers (underwriters)
competitive bidding, 307–308
defined, 299
originating, 299–300
primary market functions, 299–303
rights offerings, 306–307
selling, function, 301–303
shelf registration, 306
underwriting, 300–301
Investment banking
analysis, career, 17
houses, competitive bidding (advantages/
disadvantages), 307
intermediation activities, 52
f
regulation, 312–313
Investment banking firms
defined, 50
functions, 312
innovations, 312, 313–314
Investment companies, defined, 50
Investment-grade bonds, 259
Investment grade bonds, defined, 213
Investors
accredited investors, 306
angel investors, survey, 313
diversification, 358
ladder strategy, 260
over-optimism, 287
rates of return, determination, 229
risk averse characteristic, 212
yields, attainment, 568–569
Invoice processing, 484
IOUs, sale, 473
IPO. 
See
Initial public offering
IPO questions, 300
t
Irrelevant cash flows, 542
Irrevocable commercial letter of credit 
example, 148
f
J
Jackson, Andrew, 55
Japanese monetary systems, 40
JOBS Act, 503
Johnson, Andrew (impeachment), 172
JPMorgan Chase & Co., Bear Stearns 
(acquisition), 47, 108, 112
Jumpstart Our Business Startups (JOBS) Act 
(2012), 503
Junk bonds (high-yield bonds), defined, 
213–214, 259
Just-in-time (JIT) inventory
control system, 483
systems, 527
K
Keynesians, 38–39
Korean War, wholesale prices (increase), 
209

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INDEX
629
Monthly cash budget
example, 468
t
level production, 467
t
Monthly cash inflows, example, 464
t
Monthly cash outflows
example, 465
t
level production, 467
t
Morris, Robert, 55
Mortgage-backed security, 108
default rates, increase, 183
defined, 46, 183
types, 183–184
Mortgage banking firms, defined, 51
Mortgage bonds
defined, 262
securing, absence, 262
types, 262–263
Mortgage loans
default rates, increase, 183
origination, 182–183
underwater characteristic, 47
Mortgage markets, 182–184
defined, 15, 182
developments, 186
Mortgages
analyst, career, 17
defined, 46, 181
types, 183–184
MS. 
See
Money supply
Multibank holding companies (MBHCs), 
defined, 62
Multinational corporations, risk reduction/
speculation opportunities, 144
Municipal bond, defined, 181
Municipal securities, 474
Mutual funds, defined, 50
Mutual funds (open-ended funds), 358
underperformance, 357
t
Mutually exclusive projects, defined, 522
MVA. 
See
Market value added
N
National Association of Securities Dealers 
Automated Quotation (NASDAQ)
impact, 322
trading, 269, 320
National Banking Act of 1864, 57
National Banking Acts
payments system, 78–79
weakness, 78
National Banking System, weaknesses, 
77–78
National Credit Union Administration 
(NCUA), 93
National Credit Union Share Insurance Fund 
(NCUSIF), deposit protection, 60
National debt
amount, 113
defined, 113, 172
National economic policy objectives, 
103–105
Nations, exporting/importing, 105
NAV. 
See
Net asset value
Near-cash accounts, usage, 39
Negative correlation, defined, 360
Negative obligation, 316
example, 533
f
method, defined, 535
MOGS. 
See
Mission, Objects, Goals, and 
Strategies
Monetarists, beliefs, 38
Monetary base (MB), defined, 125
Monetary Control Act, 58
Monetary policy
defined, 86
discount rate policy, 89–90
functions/instruments, 86–93
implementation, 92–93
importance, 151
open-market operations, 90–91
quantitative easing (QE), 91–92
reserve requirements, 87–89
responsibilities, overview, 86–87
Monetary system
exercises, 42–43
flowchart, 26
f
international monetary system, 39–40
overview, 25–26, 26
f
payments mechanism, 95–97
Monetizing the debt, defined, 107
Money
creation, 13
credit money, defined, 32
defined, 27
deposit money, 32–33
devaluation (Punic Wars), 207
development, 28–33
fiat money, defined, 30
importance/functions, 26–27
representative full-bodied money, 
defined, 30
standard, history, 207
transfer, 13
velocity, defined, 38
Money market deposit account (MMDA)
balances, 36–37
savings account components, 66
Money market mutual funds (MMMFs)
defined, 37
money, flow, 58
usage, 39
Money markets, 181
defined, 14
Money market securities, 33–35, 
34
f,
181
characteristics, 34
f
defined, 33–34
types, 34
f
Money multiplier (m), 124–126
defined, 125
Money supply (MS)
change, 115–121
price changes, impact, 210–211
decrease, 86
definition, broadening, 36
economic activity
psychological factor, impact, 39
relationship, 37–39
exclusions, 36, 37
expansion, 54
increase, 86, 211
impact, 210–211
portfolio
beta, 366
defined, 365
problems, 341
quality, identification, 322–323
stabilization, defined, 303
Market segmentation theory, defined, 206
Market timing, 591–592
hypothesis, defined, 591
Market value added (MVA), defined, 403
Market value ratios, 425
analysis, 437–439
defined, 437
Marshall, John, 387
Martin, Jr., William McChesney, 84, 85
Maturities, risk, 498–499
Maturity factoring, defined, 509
Maturity-matching approach, 492–493, 494
defined, 492
Maturity risk premium (MRP)
defined, 197
requirement, 200
Maturity stage, 180
MBHCs. 
See
Multibank holding companies
Medicare, primary expenditures, 171
Medium of exchange, defined, 27
Member banks (Fed component), 80–82
Merchandise trade balance, defined, 152
Merck & Company
capital project, 525
mission, 383
Merger and acquisition (M&A) activities, 
impact, 312
Merrill Lynch, sale, 47
Mexican War, 208
Microeconomic risk, 364
Microsoft
data, application, 347
dividend payout ratio, 271
historical variance, 346
returns
distribution, 348
t
plot, 374
f
variance computation, 346
t
stock prices, 344
f
behavior, 344
f
Middle Ages, historical international price 
movements, 207–208
Miller, G. William, 84, 85
Millionaire, attainment (process), 234
MIRR. 
See
Modified internal rate of return
Mission, Objectives, Goals, and Strategies 
(MOGS), defined, 522
Mission, usage, 383
Mission statement, defined, 383
MMDA. 
See
Money market deposit account
MMMFs. 
See
Money market mutual funds
M1 money supply, 35–36
defined, 35–36
M2 money supply, 36–37
defined, 36
Modified accelerated cost recovery system 
(MACRS), 420
Modified internal rate of return (MIRR), 
527, 535
decision rule, 536

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630
INDEX
Overvalued investment opportunities, 220
Owners
capital, 66
equity, 396, 503
Ownership
equity, 194
liquidity, 385
P
Paper checks, physical transfer, 54
Paper currency (physical money), 28–32
evolution/usage, 29
fiat money, 36
Paper money, usage, 207–208