Fin/370 - Week 1 Individual Assignment Essays

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Pedro Reyes – FIN/370 Week 1 Individual Assignment Resource: Financial management: Principles and applications Define the following terms and identify their roles in finance: * Finance - The “science of funds management.” Finance includes saving money and often includes lending money. The field of finance deals with the concepts of time, money, risk and how they are interrelated. Finance also deals with how money is spent and budgeted. * * Efficient market - A market in which the values of all assets and securities at any point in time reflect all available public information. In order to understand what causes price changes in stock prices and how securities are valued or priced in the financial markets, it is…show more content…
The purpose of businesses is to maximize the market value of existing shareholders’ common stock. * * * Bond - A type of debt or a long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest each year. Bonds provide the borrower with external funds to finance long-term investments * * * Capital - Money used by entrepreneurs and businesses to buy what they need to make their products or provide their services. This refers to the funds provided by lenders (and investors) to businesses to purchase real capital equipment for producing goods/services. * Debt – Anything owed or assets owed. Debt is created when a creditor lends a sum of assets to a debtor. Debt is usually granted with expected repayment plus interest. * * Yield - Describes the amount in cash that returns to the owners of a security. Yield applies to various stated rates of return on stocks, bonds and other investment type insurance products. * Rate of return - The ratio of money gained or lost on an investment relative to the amount of money invested. The amount of money gained or lost may be referred to as interest, profit/loss, gain/loss, or net income/loss. This is also known as return on investment (ROI). * * Return on investment - The ratio of money gained or lost on an investment relative to the amount of money

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