Financial Terms

Gloria Franklin

Finance/370

August 29, 2012

Defining Financial Terms

Finance is the study of how people and business evaluate investments and raise capital to fund businesses.

Efficient Market is where security prices reveal all information available. If there is wrong information it should be adjusted to reflect new information.

Primary Market is the first group of investors to buy new issues, such as stocks and bonds. The primary market investors who buy stocks and bonds in the primary market are not required to pay brokerage commissions. When stocks and bonds are purchased when first offered for sale, the money spent to purchase the stocks and bonds go to the issuer, and this is also known as buying in the primary market.

Secondary Market consists of all sellers and buyers. The secondary market is less volatile than the primary market.

Risk is the uncertainty of an investment. There is the possibility that one might not get the actual return on his or her investment. There is also possibility of losing money or property.

Security is a certificate or document that shows ownership in a company or in property.

Stock is a portion of ownership in a corporation. The stockholder is entitled to part of earning and assets of the corporation

Bond is a certificate that shows proof of a debt or obligation. Bonds can be long-term or short-term.

Bonds are debit securities issued by companies or the government.

Capital is money that has been invested to generate income to be available for future use.

Debt is money that is owed to a person or to a company. Debt is a liability, and obligation to repay the amount that is owed.

Yield is the rate of return on an investment.

Rate of Return is the amount of revenue that an investment generates over a given period of time as a percentage of the amount of capital invested.

Return on Investment is all the income that is earned on the investment, as well as any profit from selling...