event that the company goes bankrupt, common stockholders are last in line for the company’s assets. They will not receive any money until after the preferred stockholders are paid out. c) Dividends of preferred stocks are paid at regular intervals and generally greater than those of common stocks.
(2) IPO means initial public offering. The market for stock that has recently gone public is called the IPO market. When a private corporation’s stock is offered to the public for the first time, it needs to use an IPO market.
(3) The commission brokers are individuals employed by brokerage firms that are members of the NYSE. The floor brokers are independent, freelance brokers who work for themselves rather than for a brokerage firm.
(4) The NYSE is an auction-based market where traders meet on the floor of the exchange, using person-to-person, telephone orders or electronic orders. The Nasdaq, on the other hand, is strictly an electronic exchange, an intangible organization.
(5) Margin requirement is the amount that an investor must deposit in a margin account before buying on margin or selling short, as required by the Federal Reserve Board’s Regulation T.
2. Translate the following passages into English
(1) The Shanghai Stock Exchange (SSE), which was founded on November 26, 1990
and came into operation on December 19 at the same year, is a non-profit corporation directly governed by the China Securities Regulatory Commission (CSRC). The SSE adopts the electronic auction trading mode and the buying and selling of all the listed securities must be made by public bidding through the mainframe computer. It is the mainframe computer that matches the deals in accordance with the principal of price-time priority. By the end of December 2007, the SSE possessed 1,125 listed securities and 860 listed companies, with a combined market capitalization of RMB 26,983.9 billion yuan.
(2) Dow Jones Industrial Average is one of the stock indexes created by Charles Dow,
the founder of The Wall Street Journal and the Dow Jones & Company. It reflects the general trend of the US stock market, covering such industries as finance, manufacturing, science and technology, entertainment, and retail. 3. Translate the following passages into Chinese
(1) 卖空股票涉及使用借入的资金，这就是人们所知的保证金交易。当进行卖空交易时，你开立一个保证金账户，有了这个账户你就可以用你的投资作为抵押从经纪公司借入资金。当用保证金账户做多的时候，你很难控制损失，因为你必须满足25%的最低维持保证金的要求。如果账户余额低于这个标准，你就会收到追加保证金的通知，你将被迫要么存入更多的现金，要么清算头
寸。
(2) 周一美国主要股票指数收盘略高，这是由最后一分钟的买盘拉起的。道琼斯工业平均指数连续11天增长。周一，由30只股票构成的道琼斯工业平均指数收盘在9,108.51点的更高点位，上涨15.26点，涨幅0.17%。标准普尔500指数收盘在982.18点，增加了2.92点，增幅0.30%。高科技重工业纳斯达克综合指数上涨1.93点，以1,967.89点收关，涨幅为0.10%。
Unit 8 Mortgage Market
1. Answer the following questions based on the text
(1) A mortgage is a pledge of property to secure payment of a debt. It may refer to a loan secured by a mortgage on real property.
(2) The mortgages are originated by the mortgage originators, such as thrifts, commercial banks, mortgage bankers, life insurance companies, etc. The possible fees the originators collect include origination fee and servicing fee.
(3) The difference between fixed rate mortgages and adjustable-rate mortgages lies in that the former’s interest rate and monthly payment do not vary over the life of the mortgage, but the interest rate on the latter is tied to some market interest rate and therefore changes over time.
(4) A balloon mortgage does not fully amortize over the term of the loan, and the balance will be paid at maturity. The final payment is called balloon payment because of its large size.
(5) Asset securitization is a financial innovation that uses a mortgage or a pool of mortgages as collateral for issuing a security or securities. Different from traditional system for financing the acquisition of assets, it calls for a financial intermediary to originate a loan, retain the loan in its portfolio, and service the loan and obtain funds from the public.
(6) A pass-through is a security that is created when one or more holders of mortgages from a pool of mortgages sell shares or participation certificates in the pool. It was created because risk-averse investors prefer investing in a pool of mortgages. A pass-through is considered more liquid than an individual mortgage. (7) Tranche is a French word meaning “slice” or “portion”. It is used to describe a security that can be split up into smaller pieces and subsequently sold to investors. The number of tranches of collateralized mortgage obligations depends on how many maturity classes the CMO is divided into. Usually, tranches with a first lien on the assets of the assets pool are senior tranches and are safer investment, and tranches with either a second lien or no lien are junior notes and more risky investment.
2. Translate the following passages into English
(1) Asset securitization is the act of transferring the assets that lack liquidity into securities that can be traded freely in the financial market. For example, the mortgage originator can sell a mortgage to the investor who wants to put the mortgage in a pool of mortgages and then issues securities using the pool as collateral, or the mortgage originator can issue a security using the mortgage as collateral. In either case, once a mortgage is used as collateral to issue a security, the mortgage is securitized.
(2) Adjustable-rate mortgage is a mortgage loan that the interest rate of the balances is adjusted to the specific benchmark rate according to the loan contract. Adjustable-rate mortgage allows the borrower to pay a lower down payment if he or she is willing to bear the risk of interest rate fluctuations, so that the borrower can borrow more money in the loan. But the repayment amounts will increase as the lending rate goes up.
3. Translate the following passages into Chinese
(1) 这次危机可以归咎于那些许多年来一直充斥着住房和信贷市场的各种因素。导致危机的原因包括：房屋所有者主要因可调利率抵押贷款利率的重新设定而丧失了偿还抵押贷款的能力，借款人的力不从心，掠夺性的贷款，在经济繁荣时期的投机和住房的超量建设，高风险的抵押产品，过高的个人和公司债务水平，分散乃至隐藏抵押违约风险的金融产品，货币政策，国际贸易失衡，以及政府监管（或者缺乏政府监管）等。
(2) 2-28贷款是可调利率抵押贷款，其利率基于伦敦银行同业拆借利率且在前两年是固定不变的。在余下的28年中，该贷款利率将会调整，通常每6个月调整一次，并且在之后的几年会显著增长。这种贷款提供给那些信用较低的客户。
Unit 9 Foreign Exchange Market
1. Answer the following questions based on the text
(1) Foreign exchange market is a worldwide decentralized over-the-counter market
for the trading of currencies.
(2) The participants in foreign exchange market include banks, commercial
companies, central banks, hedge funds, investment management firms, retail foreign exchange brokers, and other participants like the non-bank foreign exchange companies.
(3) A spot contract represents a binding commitment for an exchange of funds with
normal settlement and delivery in one or two business days from trade date. A
forward contract is an agreement made today for an obligatory exchange of funds at some specified time in the future.
(4) It is an agreement between two parties to exchange two currencies at a certain
exchange rate at a certain time in the future. For example, if a company knows that it will need British pounds in the future and another company knows that it will need U.S. dollars, they agree to swap the two at the agreed-upon exchange rate. This eliminates the risk that the exchange rate will change in a way that is disadvantageous to one party or the other.
(5) Arbitrage is the simultaneous, or nearly simultaneous, purchase of securities in
one market for sale in another with the expectation of a risk-free profit. Suppose that the exchange rates (after taking out the fees for making the exchange) in London are ￡5 = $10 = ￥1,000 and the exchange rate in Tokyo are ￥1,000 = $12 = ￡6. Converting ￥1,000 to $12 in Tokyo and converting $12 into ￥1,200 in London, for a profit of ￥200, would be arbitrage. 2. Translate the following passages into English
(1) Foreign exchange market is a market where participating financial institutions like
banks, self-management brokers, and large multinational corporations are linked by the intermediaries or telecommunication systems and all kinds of currencies are traded. They may be tangible, such as exchanges or bourses, and intangible, such as the interbank foreign exchange market trading through telecommunication systems.
(2) Arbitrage has become a major means of trading in international financial markets,
and due to its stable profits, the risk of arbitrage is relatively low. Majority of large funds have adopted arbitrage or partial arbitrage to trade in futures or options markets. With the standardization and development of China’s futures market and the diversification of listed products, the market contains a large number of arbitrage opportunities and arbitrary has hence become an effective way for some large institutions to participate in the futures market. 3. Translate the following passages into Chinese
(1) 本年度美元对美国六大贸易伙伴国的货币交易均处于最低水平，因为预期全球经济正在摆脱二战以来最严重的萧条，降低了对安全的需求。在报告显示上个月新房销售量是8年来的最大值之后，美元对欧元的交易触及7周的低点。由于分析师两年来首次提升美国公司利润估值，鼓励了日本投资者到海外寻求更高的投资回报，日元对其主要对手货币的比率下降。
(2) 在进行外汇交易时，通常是将两种货币组合起来进行交易。进行交易的货币通常是但并不总是高价值的货币。在进行美元对新加坡元的交易时，通常的做法是买入或卖出一笔固定数目的美元，如1,000,000美元。在平仓时，进行
相反的交易，即卖出或者买入1,000,000美元。在这两次交易中，利润或亏损将明显反映在贷记和借记的新加坡元的数目上。
Unit 10 Exchange Rate Regimes
1. Answer the following questions based on the text
(1) Dollarization means the use of foreign currency as the national currency. (2) Under a fixed peg system, the country pegs its currency at a fixed rate to another currency or a basket of currencies of its major trading or financing partners, weighted to reflect the geographical distribution of trade, service, or capital flows. The rate may fluctuate within a narrow bank of plus or minus 1% around the rate. Under a crawling peg system, the currency is adjusted periodically in small amounts at a fixed rate or in response to changes in selective quantitative indicators. The rate of crawl can be set to generate inflation-adjusted changes in the exchange rate, or it can be set at a preannounced fixed rate and/or below the projected inflation differentials.
(3) The trilemma is that a country can achieve only two of the following goals: exchange rate stability, full financial integration, and monetary independence. (4) It is hard to say which one is better. It depends. The fixed exchange rate system can help establish the credibility of a program to bring down inflation. The risk is that the peg will become unsustainable if confidence in the authorities’ willingness or ability to maintain it is lost. A flexible exchange rate provides greater room for maneuver in a variety of ways. The danger here is that it will probably be harder to establish a credible policy to control inflation, and the expectations of higher inflation often become self-fulfilling.
(5) It depends. In a world of floating exchange rates among the major currencies, it is more likely to have a single currency peg if the peg is to the currency of the dominant trading partner. By pegging to a currency basket instead, a country can reduce the vulnerability of its economy to fluctuation in the values of the individual currencies in the basket.
2. Translate the following passages into English
(1) Our country has carried out a managed floating system based on market supply and demand and adjustable to a basket of currencies since July 21, 2005. RMB no longer pegs to the single U.S. dollar, but has formed into a more flexible exchange rate regime. The People’s Bank of China declares the closing prices of dollar and other currencies against RMB in the interbank foreign exchange market after the market is closed every day. These prices will be used as middle prices of the currencies against RMB for the next day.