Fin/370 Week 1 Financial Terminology

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Financial Terminology
FIN/370
March 9, 2011

Finance
A branch of economics concerned with resource allocation as well as resource management, acquisition and investment. Finance deals with matters related to money and the markets.
Efficient market
Efficient market is the market where all pertinent information is available to all participants at the same time, and where prices respond immediately to available information. Stock markets are considered the best examples of efficient markets.

Primary market
Primary market is the location where the securities are issued for the first time on exchange. In a primary market, the investor does not buy from another investor and the issue price is the same for the buyers.

Secondary market
A secondary market is a place where an investor can buy securities from another investor rather than the issuing companies for more or less than the actual price.
Risk
Risk is the uncertainty involved in any transaction, as the actual return earned on investment may be different from expected. The chance that there is a difference is also known as risk.
Security
The instrument which represents right on the profit which is generated by the use of assets of business is called security. Some securities are interest based and some are dividend based securities. Some of the securities are common stock, preferred stock, bonds, notes, debenture, option, future, swap, right, warrant or any other financial assets.

Stock
Stock represents the ownership in the business and a claim on part of the company’s assets and earnings.
Bond
It is a debt instrument, which describes the amount of money loaned, the rate of interest, the maturity date and method of payment of interest and principal.
Capital
Capital is known as the amount invested by the owner of the business.
Debt
Debt is an obligation to be paid back by the business and it is also knows as liabilities. Debt also...
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