Finance Terms Fin370

* Define the following terms and identify their roles in finance:

• Finance - the study of funds management. The general areas of finance are business finance, personal finance (private finance), and public finance.

• Efficient market - Efficient market is one where the market price is an unbiased estimate of the true value of the investment.

• Primary market - is that part of the capital markets that deals with the issuance of new securities. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue

• Secondary market – is also called the aftermarket is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold

• Risk - is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome).

• Security - is generally a fungible, negotiable financial instrument representing financial value.[

• Stock – is a value or share that a person can buy to have a partnership on in a business. This is also a way for companies to get funds or be funded for projects.

• Bond - is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest (the coupon) to use and/or to repay the principal at a later date, termed maturity.

• Capital – is money that someone has invested. This is used to start up new projects or task a risk on them

• Debt – debt is the negative equity that a business owe. This is found in business that have used bonds and have yet to pay them off.

• Yield - the amount in cash that returns to the owners of a security. This is seen in stock exchange

• Rate of return is the ratio of money the is made or lost on a project or investment relative to the amount of money invested. This is sometime associated with assets and capital.

• Return on investment used to evaluate the...