Market Orders: buy or sell orders that are to be executed immediately at current market prices; bid price-price a dealer is willing to purchase a security; ask price- price a dealer will sell a security Limit Orders: an order specifying a price at which an investor is willing to buy or sell a security Stop Order: trade is not to be executed unless stock hits a price limit; Stop- Loss- stock is to be sold if its price falls below a certain level; Stop-Buy- stock is to be bought when its price rises above certain limit Algorithmic trading- the use of a computer program to make rapid trading decisions High Frequency trading- subset of algorithmic trading that relies on computer programs to make very rapid trading decisions; strategy lies with the firms to identify profit opportunities the fastest—?bid ask spreads, cross-market Arab.

Dark pools- electronic trading networks where participants can anonymously buy/sell large blocks of securities (10,000+ shares) Margin- the portion of the purchase price contributed by the investor, remainder is borrowed from the broker- limit on how much you can borrow (50% must be paid in cash) Margin Call: requires the investor to add new cash to the margin account hen the value Of the securities fall below the loan Chapter Four Investment Companies- financial intermediaries that invest the funds of individual investors in securities or other assets; each investor has a claim to the portfolio the investment company establishes Net Asset Value (NAVA)- value of each share in portfolio; assets minus liabilities expressed on a per share basis (Market Value of Assets-Liabilities)/shares outstanding Open-ended fund- fund that issues or redeems its shares at NAVA; when investors want to cash out their shares of a portfolio they sell them back to he fund at NAVA Closed-end fund- shares may not be redeemed in these funds but traded at prices that can differ from NAVA; when investors want to cash out shares they must sell their shares to other investors. Pooled portfolios with fixed number of shares, price determined by supply and demand.

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Real Estate Investment Trusts (Reedits)- similar to closed end funds; invest in real estate or loans secured by real estate Hedge Fund- private investment pool, open to wealthy/institutional investors, that is exempt from most SEC regulations because they are structured as riveter partnerships and can pursue other investment options such as derivatives, short sales, & leverage Mutual Fund- common name for an open-ended investment company; charge investors a load- sales commission on mutual fund, which is usually around 6%; performance generally does not beat the market when you take fees into account Front-end load: paid when you purchase the shares Back end load: exit fee when you sell your shares 1 b-1 Charges: annual fees charged by a mutual fund to pay for marketing and distribution costs; don t take fee up front, take % every year

Taxation- paid by investors in mutual funds not by fund itself Money Market Funds- invest in commercial paper, repurchase agreements, or certificates of deposit; high quantity low risk, very liquid investments, pay almost nothing Equity Funds- invest primarily in stock Bond Funds- invest in longer term funds but further specialization in this sector Balanced Funds- Invest in both stocks and bonds- some are funds Of funds: mutual funds invest in shares of other mutual funds Index Funds- tries to match the performance of a broad market index Exchange-traded Funds- offshoots of mutual funds that allow investors to read index portfolios; portfolio can get larger or smaller as people buy and sell; trades on an exchange; shares can change in number- if buyers>sellers, more shares created.

If sellers>buyers, less shares created Chapter Five Holding period return (HP); rate of return over a given investment period; (end price-beginning price+dividend)/beginning price Arithmetic average: the sum of returns in each period divided by the number of periods Geometric average: the single per-period return that gives the same cumulative performance as the sequence of actual returns * *better presentation Dollar weighted average return: the internal rate Of return on an investment Risk: degree of confidence we have in what we expect will happen to future H Pros Normal Distribution- central to the theory and practices of investments; measures .