Definitions Week 1

Topics: Rate of return, Stock market, Investment Pages: 7 (2049 words) Published: November 1, 2014
Definitions Define the following terms using your text or other resources. Cite all resources consistent with APA guidelines. TermDefinitionResource you usedTime value of moneyA dollar received today is worth more than a dollar received in the future. Conversely, a dollar received in the future is worth less than a dollar received today.Titman, S., Keown, A. J., Martin, J. D. (2014).Financial Management. Principles and Applications(12th ed.). Pearson Education.Efficient marketWhen money is put into the stock market, the goal is to generate a return on the capital invested. Many investors try not only to make a profitable return, but also to outperform, or beat, the market.However, market efficiency - championed in theefficient market hypothesi (EMH) formulated by Eugene Fama in 1970, suggests that at any given time, prices fully reflect all available information on a particular stock and/or market. Fama was awarded the Nobel Memorial Prize in Economic Sciences jointly with Robert Shiller and Lars Peter Hansen in 2013. According to the EMH, no investor has an advantage in predicting a return on a stock price because no one has access to information not already available to everyone else.nvestopedia Financial Dictionary What is Market Efficiency.(2014).Retrieved on August 11, 2014 from HYPERLINK http//www.investopedia.com/articles/02/101502.asp http//www.investopedia.com/articles/02/101502.asp Primary versus secondary marketPrimary market, A part of the financial market where new security issues are initially bought and sold. Secondary market,The financial market where previously issued securities such as stocks and bonds are bought and sold. Titman, S., Keown, A. J., Martin, J. D. (2014).Financial Management. Principles and Applications(12th ed.). Pearson Education.Risk-return tradeoffWe wont take on additional risk unless we expect to be compensated with additional return.Titman, S., Keown, A. J., Martin, J. D. (2014).Financial Management. Principles and Applications(12th ed.). Pearson Education.Agency (principal and agent problems)Conflicts of interest and moral hazard issues that arise when a principal hires an agent to perform specific duties that are in the best interest of the principal but may be costly, or not in the best interests of the agent. The principal-agent problem develops when a principal creates an environment in which an agent has incentives to align its interests with those of the principal, typically through incentives. Principals create incentives for the agent to act as the principal wants because the principal faces information asymmetry and risk with regards to whether the agent has effectively completed a contract.Investopedia Financial Dictionary Principal-Agent Problem.(2014).Retrieved on August 11, 2014 from HYPERLINK http//www.investopedia.com/terms/p/principal-agent-problem.asp http//www.investopedia.com/terms/p/principal-agent-problem.asp Market information and security prices and information asymmetryA situation in which one party in a transaction has more or superior information compared to another. This often happens in transactions where the seller knows more than the buyer, although the reverse can happen as well. Potentially, this could be a harmful situation because one party can take advantage of the other partys lack of knowledge.Investopedia Financial Dictionary Asymmetric Information.(2014).Retrieved on August 11, 2014 from HYPERLINK http//www.investopedia.com/terms/a/asymmetricinformation.asp http//www.investopedia.com/terms/a/asymmetricinformation.asp Agile and lean principlesLean and Agile share many of the same principles and many Agile principles are borrowed from Lean thinking. Principles of Lean 1. Eliminate Waste2. Build Quality In3. Create Knowledge4. Defer Commitment5. Deliver Fast6. Respect People7. Optimize the Whole Principles of Agile 1. Highest priority is customer satisfaction2. Welcome changing requirements3. Frequent delivery of software4. Business...
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