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Language reference - market idioms

Financial journalists and people working in finance use lots of different expressions to describe price changes in financial markets. These are the most common ones. (Some of these words also appear in Unit 38.)

Small or slow upward movement
to advance to firm to be firm to be firmer   - to gain to be a little stronger to be slightly stronger
Large upward movement
Verbs     Nouns
to jump to leap to rocket to shoot up to skyrocket to soar to strengthen to surge to take off   a jump a leap
Upward movement following previous downward movement
Verbs     Nouns
to stage a comeback to rebound to recover \ / a comeback a rallv j a rebound
to revive to rally   \ / a recovery
Small or slow downward movement
Verbs     Nouns
to dip to lower to decline to slide to drift down to ease to weaken to slip or slip back to be or come under pressure - a decline a slide
Large downward movement
Verbs     Nouns
to crash to dive to drop to sink to skid to slump to plummet to fall sharply to go south to go or fall through the floor to plunge or take a plunge to suffer a drop or a setback to take a beating or a knock to tumble or take a tumble - a crash a dive a drop
No change
to be or remain steady or stable ----------------------------------------------------------------------------------------- ^ to be or remain unchanged

Note: Some verbs have irregular past forms, for example leap - leapt - leapt; shoot - shot - shot] fall - fell - fallen.

Language reference - numbers

Saying and writing numbers

Everyone working in finance uses a lot of numbers. Saying and understanding numbers or figures in a foreign language can be difficult.

This is how numbers above 100 are said, and written in legal contracts and on cheques:

100 a hundred or one hundred

200 two hundred (not two hundreds)

1,000 a/one thousand

1,100 a/one thousand one hundred or eleven hundred

1,234 a/one thousand two hundred and thirty-four

or twelve hundred and thirty-four

2,200 two thousand two hundred

100,000 a/one hundred thousand

1,000,000 a/one million

1,000,000,000 a/one billion

1,000,000,000,000 a/one trillion

BrE: uses 'and' in figures - a hundred and twenty-five thousand; AmE: doesn't use 'and' in figures - a hundred twenty-five thousand

English uses a comma (,) to separate large numbers into groups of three digits, counting from the right.

12,345 twelve thousand, three hundred and forty-five

12,345,678 twelve million, three hundred and forty-five thousand, six hundred and seventy-eight. Note: English does not use a raised comma (12'345).

Saying amounts of currency

The name of a currency is said after the number (or in the middle of the number), but is written before the number.

ˆ10 ten euros

$10.95 ten dollars ninety-five

¥50,000 fifty thousand yen

£3.50 three pounds fifty or three fifty

The smaller currency unit (e.g. cents or pence) is not usually said.


English uses a point (.) for decimal numbers. The numbers before a decimal point are said normally. All the digits after a decimal point are said separately.

1.25 one point two five

12.45 twelve point four five

3.14159 three point one four one five nine

If the decimal is a unit (of money, for example), both parts can be said like normal numbers.

87.65 eighty-seven point six five

$87.65 The stock is trading at eighty-seven sixty-five.


h a half 5/i6 five sixteenths
h a third / one third ?/32 seven thirty-seconds
u a quarter / one quarter 1V2 one and a half
u three quarters   two and two thirds
/5 a fifth    


BrE: a quarter;

AmE: a quarter, a fourth

To put things in an order, use ordinal numbers.

This is the forty-seventh floor


47th floor

1st (the) first 60th (the) sixtieth
2nd (the) second 61st (the) sixty-first
3rd (the) third 62nd (the) sixty-second
4th (the) fourth 100th (the) hundredth
5th (the) fifth 1,000th (the) thousandth
6th (the) sixth    

Saying sequences of numbers

0 is called zero (or sometimes in Britain, nought).

the one oh six bus

After a decimal point and in telephone numbers, room numbers, bus numbers, etc., British English uses oh.

room seven oh four

For telephone numbers, fax numbers, bank account numbers, credit card numbers, passport numbers, etc., people usually say each digit separately, but in groups of two, three or four digits.

0202-456-1414 oh two oh two, four five six, one four one four

An exception is double numbers:

0255-226-3344 oh two double five, double two six, double three double four

A rising intonation is used at the end of each group of numbers except the last one, which has a falling tone, showing that the end of the number has been reached.

00 44 1223 325 566

Numbers as adjectives

a ten-thousand euro bonus a fifty-thousand dollar car

When a number is used as part of an adjective, it is always singular (i.e. it doesn't have an -5 at the end).

a twenty-minute walk a four-syllable word

a two-hour flight a five-person team

a three-day holiday a six-figure number

If you find saying long numbers difficult, practise reading numbers aloud from a business newspaper, or using your personal documents, telephone book, etc.

Language reference - word stress

Long words can be divided into different parts, each of which is a unit of pronunciation. These units are called syllables. The word syl-la-ble has three syllables, u-nit has two, pro-nun-ci-a-tion has five.

In spoken English, syllables are either stressed or unstressed (or accented and unaccented). In the following examples the syllable following the (') mark is stressed.

■ One syllable of nouns ('business), verbs (in vest), adjectives [ex pensive) and adverbs {'quickly) is stressed.

■ Prepositions (m, at, to), pronouns (he, me), and articles (a, the) are usually unstressed.

1 The usual rule for two-syllable words is to stress the first syllable. 'asset 'budget 'credit

2 Most three-syllable words are also stressed on the first syllable. 'auditor 'capital 'corporate

3 Most words of four or more syllables are stressed on the third syllable from the end. col'lateral e'conomy lia'bilities

4 Because not all syllables are pronounced in English, some words which look like they have three syllables are reduced to two, and some words which look like they have four syllables are reduced to three. This means that these words are stressed on the first syllable. In the examples below, the letters marked [ ] are not pronounced.

bus[ ijness int[ e }rest int[ e J resting secret[ajry diction [ a ]ry

5 However, there are lots of exceptions to these rules. The most common one is that most (Latin) prefixes are not stressed, but even this rule has an exception since the pre- in 'prefix' is stressed.

co- collect con- connect pre- pre1 diet

com- component ex- expect pro- pro'vide

6 There is a large group of two-syllable words which are both a noun and a verb, or an adjective and a verb, which are stressed on the first syllable of the noun or adjective, and the second syllable of the verb.

We're looking for 'finance - we need someone to finance the company. We're using a new 'transport company to trans'port the goods from China.

Two-syllable words that follow this stress pattern include:

conduct decrease increase refund conflict discount permit reject

contrast export present survey

convert import produce transfer

Because of this rule, and the large number of verbs that begin with a prefix, more two-syllable verbs are stressed on the second syllable than the first (despite rule 1 above).

Where these words are also adjectives (a 'perfect product, an 'import barrier), they are stressed like the noun. Where the adjective is the same as the past participle of the verb (perfected, un ported), it is stressed on the second syllable, like the verb.

7 Most suffixes are unstressed. Exceptions include:

-ation alio'cation depreciation integration
-ition po'sition acquisition con'ditional
-otion pro'motion pro 'motional  
-ution institution so 'lution distribution
-ee employee trainee guar an'tee
-eer car eer engin 'eer  

Suffixes do not normally change the three-syllable rule, so 1advertising and 'organizer are stressed on the first syllable, although they are four-syllable words.

8 There are various regular patterns of syllables (often at the end of a word) that come just after a stressed syllable.

■ Most words ending in -ic, -ical and -ically are stressed on the previous syllable. auto ymatic eco'nomic bis'torical syste'matically

■ Most words ending in -ial, -ially, -ual, and -ually are stressed on the previous syllable. com'mercial financially \annual individually

■ Most words ending in -ible, -ity and -ify are stressed on the previous syllable. con 'vertible converti1 bility di'versify

■ Most words ending in -ious, -eous and -nous are stressed on the previous syllable. 'obvious simul taneous am'biguous

9 The last letter of a group of initials is usually stressed.


Language reference - British and American vocabulary

British English American English
aluminium aluminum
Annual General Meeting (AGM) Annual Meeting of Stockholders
Articles of Association Bylaws
balance sheet balance sheet / statement of financial position
base rate prime rate
building society savings and loans association
cash dispenser ATM (Automated Teller Machine)
chairman president
cheque check
convertible share convertible bond
corporation tax income tax
cost centre cost center
creditors accounts payable
current account checking account
debtors accounts receivable
depreciation depreciation / amortization
Extraordinary General Meeting (EGM) Special Meeting
financial year fiscal year
fixed assets property, plant and equipment
flat apartment
flotation initial public offering (IPO)
gearing leverage
index-linked fund tracker fund
labour labor
managing director chief executive officer (CEO)
Memorandum of Association Certificate of Incorporation
merchant bank investment bank
net profit net income
note or banknote bill
ordinary shares common stock
overheads overhead
own shares treasury stock
petrol gasoline
|PLˆ listed company
preference shares preferred stock
profit and loss account income statement
shareholder stockholder
shareholders' equity stockholders' equity
shares stocks
shopping centre shopping mall
social security welfare
stock inventory
stock take count of the inventory
traveller's cheque traveler's check
true and fair view fair presentation
visible trade merchandise trade

Answer key

1 social security, salary

2 earn, commission


7 tax

8 rent

9 pension

4 mortgage

5 currency

6 overtime

3 bonus

1 false - most money ... consists of bank deposits

2 true - salaries are usually paid monthly and wages are usually paid weekly

3 false - commission is a percentage of the income they generate, which can change

4 true - money paid by a company or the government to a retired person is a pension


5 false - most people pay one or the other, depending on whether they are buying or renting their home




  2i         b r r 4o w  
5 f u n d s               w    
    v   s   6s   b a l a n c e
    E       h           e    
    Ss h "a r e h l "D e r s  
    t   s s   e t       v   s    
    "r   e     ,2c a p t a l  
  b e b t           d        
    v     ,4b 'b n d   e        
    e       w   '6! n c 'o m e
  181 n t e r e s "T   d   w    
    u           a       n    
  20l e n d     2,e x p e n s e s
1 bookkeeping, a bookkeeper 2 external auditing, an independent auditor 3 management accounting, a management accou 4 financial accounting, a financial accountant 5 accounting, an accountant / internal auditing, ;

3.2 1c, 2e, 3a, 4b, 5d

3.3 carry out an audit do an audit establish rules follow rules make rules

set rules apply standards establish standards use standards record transactions summarize transactions

4.1 1 debit 3 debtors 5 stock

2 ledger 4 credit 6 creditors

4.2 1 Double-entry bookkeeping, account, debit

2 day books, journals

3 nominal ledgers, bought ledger

4 trial balance

4.3 1 debit 3 debit, credit 2 credit 4 credit, debit

5.1 1 false - a company ... has a separate legal existence from its owners, the shareholders

2 false - the owners are not fully liable for - or responsible for - the business's debts ... Their liability is limited to the value of their share capital

3 true - managers and executive directors run the company for its owners

4 true - Non-executive directors are often more objective

5 false - partners are fully liable or responsible for any debts the business has

6 false - partnerships are not legal entities, so in case of a legal action, it is the individual partners and not the partnership that is taken to court

5.2 corporate governance audit committee limited liability non-executive directors share capital

4 limited liability

5 corporate governance

1 audit committee

2 non-executive directors

3 share capital

5.3 a Memorandum b registered office

6.1 1 private

2 stock exchange

c purpose

d authorized share capital

7 quarterly

8 annual report


4 quoted

5 interim

6 listed

3 limited

6.2 1 misconduct 3 net profit 2 gross profit 4 turnover

6.3 1e, 2a, 3b, 4c, 5f, 6d 7.1 lc, 2e, 3d, 4a, 5b

7.2 1 false - Companies can choose their accounting policies ... There are a range of methods of valuation ... and measurement

2 false - accounting policies ... have to be consistent, which means using the same methods every year, unless there is a good reason to change a policy

3 true - Areas in which the choice of policies can make a big difference include depreciation ... [and] the valuation of stock or inventory

4 false - companies have to give a true and fair view of their financial situation - meaning there are various possibilities - rather than the true and fair view - meaning only one is possible

5 true - in many countries accounting follows the historical cost principle: the original purchase price of assets is recorded in accounts, and not their (estimated) current selling price

6 true - some countries with regular high inflation ... use inflation accounting systems that take account of changing prices





'calculate calculation —
— consistency consistent
— con'vention conventional
'measure 'measurement —
pre'sent presentation —
Value 'value, valu'ation 'valuable

8.1 1 f, 2d, 3e, 4c, 5b, 6a

8.2 1 financial year / fiscal year 2 subsidiary

3 consolidated financial statements

4 verifiable





as'sume assumption —
dis'close disclosure —
— objectivity objective
'recognize recognition —
— subjectivity sub'jective
Verify verification 'verifiable

1 verify 3 objectivity

2 disclose 4 assume

9.1 1 revalue 4 obsolete

2 current assets 5 fixed assets

3 appreciate 6 wear out

9.2 deduct costs depreciate fixed assets record market value record purchase price reduce profits reduce value

1 record, purchase price

2 fixed assets, deduct, costs

3 reduce, value

9.3 1 e, 2c, 3a, 4b, 5d 10.1 1d, 2c, 3a, 4b

10.2 check accounts check stock take check systems of control comply with laws comply with policies comply with procedures comply with regulations examine accounts examine systems of control give advice give opinions





— 'accuracy 'accurate
com'ply compliance —
recom'mend recommen 'dation recom'mended
re'cord 'record —
ex'amine examination —

1 examine, accurate, comply

2 recommendations

3 recorded

11.1 1 true - American and continental European companies usually put assets on the left and

capital and liabilities on the right ... most British companies use a vertical format, with assets at the top, and liabilities and capital below

2 false - A balance sheet does not show how much money a company has spent or received during a year

3 true - Since assets are shown as debits ... and the total must correspond with the total sum of the credits ... assets equal liabilities plus capital (or A = L + C)

4 true - shows the company's liabilities, and its capital or shareholders' equity ... Part of this is share capital - the money the company raised by selling its shares

5 false - assets equal liabilities plus capital

6 true - Liabilities are obligations to pay other organizations or people: money that the company owes, or will owe at a future date

11-2 1 Suppliers 4 Liabilities

2 Retained earnings 5 Shareholders' equity

3 Assets

11.3 distribute profits grant credit owe money pay liabilities retain earnings

1 retain, earnings, distribute, profits

2 owe money, grant, credit

3 liabilities, pay

12.1 1 bad debt

2 net worth / net assets

3 patent

4 net book value

5 goodwill

12.2 1e, 2b, 3a, 4f, 5d, 6c

6 trade mark

7 write off

8 to make provisions

9 work-in-progress

10 debtors / accounts receivable

1 2.3 Current assets: cash in the bank, debtors, stock

Fixed assets: buildings, land, investments

Intangible assets: goodwill, human capital, reputation

13.1 1 false - Current liabilities are expected to be paid within a year of the date of the balance sheet

(if it has been paid, it is no longer a liability and will not appear on the balance sheet)

2 true - current is defined as within a year of the date of the balance sheet

3 true - accrued expenses are charged against income - that is, deducted from profits - even though the bills have not yet been received or the cash paid

4 true - Shareholders' equity includes: the original share capital ... share premium: money made if the company sells shares at above their face value - the value written on them ... retained earnings

5 false - shareholders' equity includes retained earnings - it is money belonging to the shareholders and not the company

3 deferred

4 accrued

6 true - share premium is money made if the company sells shares at above their face value - the value written on them

13.2 1 current liabilities

2 share premium

1 3.3 Assets: Accounts receivable, Cash and equivalents, Inventory, Investments, Land and buildings Liabilities: Accounts payable, Accrued expenses, Deferred taxes, Dividends, Long-term debt

5 financing

6 operations

7 investing


4 pre-tax income

5 net profit

1 sales revenue

2 gross profit


1 Operations

2 Investing

3 Financing

4 operations


Operating activities: Changes in operating assets and liabilities, Depreciation and amortization expenses, Income taxes payable, Net income

Financing activities: Dividends paid, Issuance of stock, Payments to repurchase stock, Repayment of debt


Investing activities: Purchase of plant and equipment, Sale of property

3 ratio

4 solvency

1 liquidity

2 efficiency


3 acid test, quick ratio

4 current ratio

1 5.2 acid test

current ratio dividend cover liquid assets quick ratio

1 liquid assets

2 dividend cover

15.3 1b, 2d, 3a, 4c

16.1 1c, 2a, 3b, 4d

16.2 1 D, 2 E, 3 A, 4 C, 5 B

17.1 1 overheads 4 profitable

2 cost centre 5 fixed costs

3 variable costs 6 breakeven point


Cost Direct Indirect Fixed Variable
Advertising expenses   /   /
Bad debts   /   /
Components /     /
Electricity to run machines /     /
Electricity for heating   /   /
Equipment repairs   /   /
Factory canteen   / /  
Overtime pay /     /
Raw materials /     y
Property tax   / /  
Rent   / /  

17.3 1a,2b

18.1 charge prices cut prices lower prices pay prices raise prices

1 cut/lower 4 charge

2 raise 5 cut/lower

5 going-rate pricing

6 loss-leader pricing

7 market penetration

3 pay

1 8.2 1 prestige pricing

2 odd pricing

3 market skimming

4 mark-up pricing

5 mortgage

6 private pension plan

7 repossess


1 current accounts

2 savings accounts

3 debit card

4 credit card

5 standing order

1 interest

2 loan

3 collateral

4 overdraft


6 direct debit

7 statements

8 foreign currency

9 traveller's cheques

1 false - a savings account or deposit account ... pays more interest

2 true - If the borrower doesn't repay the mortgage, the bank can repossess the house or flat

3 true - traveller's cheques ... are protected against loss or theft

4 true - Commercial banks ... discovered that most of their customers preferred to go to branches


5 false - customers preferred to go to branches ... especially ones ... which were conveniently situated in shopping centres (but not all branches are)

3 grant loans


1 bank account

2 corporate customers

4 conditions, personal customers

20.2 If, 2e, 3b, 4a, 5c, 6d

4 conglomerate

5 deregulation

6 takeover bid


charge interest pay interest transfer money withdraw money assess risks calculate risks

1 charged

2 withdraw

3 assess

1 financial institution

2 capital

3 merger


1 investment/merchant banks

2 insurance companies

3 investment/merchant banks

4 building societies / savings and loans associations

5 commercial/retail/High Street banks

6 investment/merchant banks

7 investment/merchant banks


8 insurance companies

4 clearing bank


1 central bank

2 investment bank

3 private bank

5 retail/commercial/High Street bank





Noun for people

a'cquire acquisition — —
ad'vise ad'vice adViser or adVisor —
'analyse a'nalysis 'analyst analytic, analytical
'institute institution — institutional
in'vest investment in'vestor —
Value Value, valuation — Valuable




1 underwritten fees
2 advised merged
3 divesting, acquiring IPOs
1 consulting firm subsidiary
2 pension fund institutional investor
3 strategic planning financial restructuring
4 forecasters valuation
1b, 2a, 3d, 4c, 5c    

23.2 a monetary c stability b supervising d financial

23.3 bank run

currency markets exchange rate financial system financial stability monetary policy

1 monetary policy, financial stability

2 bank run, financial system

5 creditworthy

6 spread

7 output

8 invest

4 d overdraft

5 b hire purchase

3 currency markets, exchange rate

24.1 1 interest rate

2 solvency

3 labour

4 floating rate

24.2 1 e discount rate

2 c base rate or prime rate

3 a mortgage

24.3 1 false - The discount rate is the rate that the central bank sets ... When this rate changes, the

commercial banks change their own base rate ... This is the rate from which they calculate all their other deposit and lending rates

2 true - When interest rates fall, people borrow more, and spend rather than save

3 false - The higher the borrower's solvency, the lower the interest rate they pay

4 true - Borrowers can usually get a lower interest rate if the loan is guaranteed by securities or other collateral

5 true - The rate that borrowers pay depends on their creditworthiness ... The higher the borrower's solvency, the lower the interest rate they pay (the bigger the risk, the higher the interest rate)

6 true - mortgages often have floating or variable interest rates that change according to the supply and demand for money

25.1 1 true - a business or government that needs cash for a few weeks only can use the money


2 false - to borrow or invest short-term capital

3 false - T-bills are ... usually sold at a discount ... rather than paying interest ... Commercial paper is ... also sold at a discount

4 false - Certificates of deposit are issued by banks

5 false - Commercial paper ... is unsecured

6 true - Certificates of deposit ... are issued by banks to large depositors who can then trade them in the short-term money markets

25.2 1 discount 4 short-term 7 maturity

2 competitive 5 unsecured 8 cash flow

3 liquidity 6 redeemed 9 par value

25.3 1b, 2c, 3a, 4e, 5d

26.1 1d, 2c, 3a, 4b, 5e

26.2 Customers of Islamic banks: 2, 3, 5 Customer of conventional banks: 1, 4

26.3 investment account service charge

risk capitalists working captial

1 working capital 3 risk capitalists

2 service charge 4 investment account

27.1 1 true — currency in circulation ... makes up only a very small part of the money supply. The

rest consists of bank deposits

2 false - time deposits [are] bank deposits that can only be withdrawn after a certain period of time

3 true - To measure money you also have to know how often it is spent in a given period ... the quantity of money spent is the money supply times its velocity of circulation

4 true - the central bank ... use[s] monetary policy to try to control the amount of money in circulation, and its growth

5 false - [the monetary authorities] can change commercial banks' reserve-asset ratio ... the percentage of deposits a bank has to keep in its reserves

27.2 broad money money supply narrow money

1 money supply

2 narrow money

3 Broad money

27.3 1 monetary authorities

2 monetary policy

3 monetary growth






































,2F 'b N D E R S

28.2 1e, 2f, 3b, 4a, 5d, 6c

1 prospectus

2 stock exchange

3 investors

4 going public

5 flotation

6 to underwrite

7 preference shares

8 ordinary shares

9 bankrupt 10 liquidation


1 false - only successful existing companies can go public

2 true - An investment bank underwrites the stock issue: guarantees to buy the shares if there are not enough other buyers

3 false - The company gets independent accountants to produce a due diligence report

4 false - preference shares ... holders receive a fixed dividend

5 false - holders of preference shares are repaid before other shareholders, but after owners of bonds and other debts

offer shares go public



produce a prospectus underwrite an issue

1 rights issue

2 nominal value

3 to capitalize

4 secondary market

5 market price

6 own shares

7 primary market


1 go

2 public

3 offering


5 produced

6 prospectus

7 underwriting

8 issue

■ newly issued shares [are] sold for the first time [on] the primary market

■ over-the-counter markets such as NASDAQ ... and AIM ... have fewer regulations market price ... depends on supply and demand - how many sellers and buyers there are automatic trading systems ... match up buyers and sellers


1 false

2 false

3 true •

4 true

5 true

The spread or difference between these prices is their profit or mark-up

5 income stock

6 rights issue

7 scrip/capitalization/bonus issue

1 value stock

2 defensive stocks

3 blue chips

4 growth stocks

1 bear market

2 bull market

3 crash



8 own shares

Possible answers:

1 They buy stocks in issues that are over-subscribed, so they can immediately re-sell them at a profit.

2 Because if a company makes a profit but does not pay dividends, its stock price will rise, and stockholders can make a capital gain by selling the stocks. Capital gains are taxed at a lower rate than dividends, which are income.

3 By agreeing to sell something at a fixed price, and then buying it at a lower price.

make a capital gain make a profit own securities pay a dividend pay tax

receive a dividend retain earnings take a position

1 pay, tax, receive, dividend, retains, earnings, make, capital gain



2 make, profit, taking, position, securities, own

32.1 1d, 2b, 3a, 4c

1 false - Fundamental analysis ... ignores the behaviour of investors and assumes that a share has a true or correct value

2 true - Fundamental analysis ... assumes that a share has a true or correct value, which ... reflects the present value of the future income from dividends

3 true - Investors can reduce these by having a diversified portfolio


32.3 33.1

4 false - Unsystematic risks are things that affect individual companies (and their shares)

1b, 2c, 3a    
1 principal Treasury bonds
2 credit rating coupon
3 gilt-edged stock Treasury notes
4 default yield
5 maturity date insolvent

33.2 1 true - The holders of bonds ... get their money ... back on a given maturity date

2 false - if a company ... declared bankrupt ... boldholders will probably get some of their money back

3 true - The highest grade (AAA or Aaa) means that there is almost no risk that the borrower will default

4 false - if interest rates rise, so that new borrowers have to pay a higher rate, existing bonds lose value

5 true - floating-rate notes ... whose interest rate varies with market interest rates

6 false - convertibles ... are bonds that the owner can later change into shares ... the buyer gets the chance of making a profit with the convertible option

7 true - zero coupon bonds ... pay no interest but are sold at a big discount on their par value

8 false - Bonds with a low credit rating (and a high chance of default) are called junk bonds

5 commodities

6 to hedge

7 futures

33.3 1 C, 2C, 3B, 4B

34.1 1 spot price

2 backwardation

3 over-the-counter

4 forwards

4 A, w

5 B, u

6 C, y

1 A, x

2 B, z

3 B, v


34.3 1 true — currencies, interest rates, stocks and stock market indexes fluctuate ... so financial

futures are used to fix a value for a specified future date

2 false - Interest rate futures are agreements to issue ... bonds, certificates of deposit, money market deposits, etc.

3 true - Interest rate futures are agreements between banks and investors and companies to issue fixed income securities ... at a future date

4 true - the buyer and seller of a financial future have different opinions about what will happen to exchange rates, interest rates and stock prices

5 false - Futures trading is a zero-sum game, because the amount of money gained by one party will be the same as the sum lost by the other

35.1 1c, 2a, 3b, 4d

35.2 1 a, d 4 a

2 b, c 5 a

3 b

35.3 1 Warrants

2 Put options

3 Swaps

35.4 1 premium 4 warrants

2 strike/exercise price 5 swap

3 call options

36.1 accumulate capital allocate assets allocate funds allocate money diversify portfolios manage accounts manage assets manage money manage portfolios

1 manage, assets/money/portfolio 3 allocate, money/funds/assets

2 diversify, portfolio 4 accumulate capital

36.2 1c, 2a, 3b

36.3 1c, 2d, 3a, 4b, 5e

37.1 1 to pool 3 to leverage

2 to take a long position 4 to take a short position

37.2 1 false - Despite their name, hedge funds do not necessarily use hedging techniques

2 true - Most hedge funds use gearing or leverage, which means borrowing money as well as using their own funds

3 false - they generally specialize in high-risk, short-term speculation

4 true - investors can profit from price differences between the two markets ... the price difference is usually very small (and would be zero if markets were perfectly efficient)

5 false - structured products from banks ... are customized ... financial instruments

37.3 1 Leverage 3 Full Participation

2 Capital Protection 4 Yield Enhancement

38.1 1 c, 2a, 3b

38.2 1 remained stable 4 grew slowly

2 risen regularly 5 sharp increases

3 increased rapidly

38.3 Possible answer:

The price of gold rose steadily during 1985-7, reaching a peak of $500 an ounce at the end of 1987. The price fell again in 1988-9. The price fluctuated rapidly in 1990, and declined slowly during 1991-2. After a sharp rise in 1993, it remained stable for four years before falling dramatically between 1996 and 1999. Gold bottomed out at nearly $250 in both 1999 and 2001. Since 2001 there has been a steady rise to over $400.

39.1 1 acquisitions 3 merger

2 joint venture 4 raid, takeover bid

39.2 1 white knight, hostile

2 friendly

3 poison pill

39.3 1c, 2d, 3a, 4c, 5b

40.1 1 parent company

2 core business

3 asset-stripping

4 subsidiaries

40.2 1b, 2d, 3a, 4e, 5c

5 leveraged

6 market capitalization

7 synergy

40.3 1a, 2f, 3b, 4e, 5c, 6d

4 time value of money

5 purchasing power

6 discount rate

1 discounted cash flow

2 rate of return

3 internal rate of return


1 false - The return we could get by investing the money in other ways is the opportunity cost of capital

2 true - the rate of return must be at least as high as we could get by depositing the money in a bank instead, or by making another risk-free investment

3 false - there's nearly always inflation, so cash will have lower purchasing power in the future: you'll be able to buy less with the same amount of money


4 true - the value of money decreases over time

41.3 1b, 2e, 3d, 4c, 5a

42.1 1 price-sensitive

2 compliance

3 insider dealing

4 money laundering

5 fraudulent

6 disclosure

7 oversee

42.2 1c, 2a, 3e, 4b, 5d

1 laundering money

2 conflicts of interest

3 compliance officer

4 insider traders

5 Chinese walls

6 deregulation



A L A N c E F T R 4A D E  
  B   A           D      
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m   l2c       'w     E         a  
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    s         t         e  
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44.1 1 true - In theory, exchange rates should be at the level that gives purchasing power parity (PPP)

... In fact, PPP does not work

2 false - if the price level in a country increases because of inflation, its currency should depreciate

3 true - Financial institutions, companies and rich individuals all buy currencies, looking for ... short-term capital gains if a currency gains in value

4 false - currency speculation [is] buying currencies in the hope of making a profit ... looking for high interest rates

5 true - currency traders make considerable profits from the spread between a currency's buying and selling prices

6 false - Over 95% of the world's currency transactions are purely speculative, and not related to trade

7 true - gold convertibility ... ended in 1971, because ... the Federal Reserve did not have enough gold to guarantee the American currency

8 true - For 25 years after World War II, the levels of most major currencies ... were fixed ... Since the early 1970s, there has been a system of floating exchange rates in most western countries


9 false - If there are more buyers of a currency than sellers, its price will rise; if there are more sellers, it will fall

Verb Noun(s) Noun for people Adjective(s)
appreciate appreciation — —
con'vert convertibility, con'version — con'verted
de'predate depreciation — —
inter'vene intervention — inter'ventionary
'speculate speculation 'speculator 'speculative

4 converting

5 speculators

6 intervene


1 depreciate

2 appreciate

3 speculation

45.1 1 true - a letter of credit ... is a written promise by a bank to pay a certain amount to the seller

... when the bank receives instructions from the buyer

2 true - a letter of credit ... is a written promise ... to pay a certain amount ... within a fixed period

3 false - Documentary credits are usually irrevocable, meaning that they cannot be changed unless all the parties involved agree

4 false - the bill of lading is a document ... confirming that the goods have been received for shipment

5 true - If a bill is endorsed by a well-known bank, the exporter can sell it ... in the financial markets ... This way the exporter gets most of the money immediately, and doesn't have to wait for the buyer to pay the bill

6 true - the exporter can sell it at a discount ... When the bill matures, the buyer receives the full amount

45.2 1f, 2a, 3c, 4d, 5e, 6b

45.3 accept a bill of exchange draw up a bill of exchange endorse a bill of exchange sell a bill of exchange write a bill of exchange prepare documents present documents require documents sign documents describe goods receive goods sell goods transport goods

1 accepted/endorsed

2 describe

3 sell

4 signs, received

5 present


7, 8 CFR / CIF

9, 10, 11 DAF/CPT/CIP







12, 13 DDU/DDP





48.1 1 peak 4 trough

2 downswing 5 recovery

3 recession 6 boom

48.2 1d, 2e, 3c, 4b, 5a

48.3 to get bigger or make bigger: boost, expand, increase, inflate, raise, rise, reflate, stimulate to get smaller or make smaller: contract, cool down, cut, decrease, deflate, reduce

49.1 1 excise taxes / excise duties

2 income tax / corporation tax

3 sales tax / value-added tax / goods and services tax

4 capital transfer tax / inheritance tax / estate tax / death duty

5 income tax and social security tax / national insurance

6 tariffs

7 capital gains tax

49.2 1 direct 4 progressive tax

2 proportional tax 5 indirect

3 social security

49.3 1 false - Most countries have a capital gains tax ... at a much lower rate than income tax

2 true - Business profits are generally taxed twice, because after the company pays tax on its profits, the shareholders pay income tax on any dividends received from these profits

3 false - Indirect taxes such as sales tax and VAT are called proportional taxes, imposed at a fixed rate. But indirect taxes are actually regressive

4 true - excise duties [are] additional sales taxes on commodities like tobacco products, alcoholic drinks and petrol

5 true - Multinational companies often register their head offices in tax havens - small countries where income taxes for foreign companies are low

6 true - some employers give their staff ... perks, such as company cars

7 false - Using legal methods to minimize your tax burden ... is called tax avoidance

3 implement, strategies

4 reach, customers

8 false - perks ... loopholes [are] ways of getting around the law ... called tax avoidance

49.4 charge tax

collect tax impose tax levy tax pay tax

50.1 implement strategies reach customers require finance supply services

1 supply, services

2 finance, require

50.2 1 market opportunity 4 marketing strategy

2 sales forecast 5 benefits

3 unique 6 sales promotions

50.3 Finance: bear market, currency market, equity market, over-the-counter market, primary market, secondary market, stock market, market capitalization, market maker, market price, market value

Marketing: market penetration, market segment, market share, market skimming


[1] Only quoted or listed companies

Date: 2015-02-28; view: 2208

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