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Defining Financial Terms 1 University of Phoenix Inthiravanh Amphonephong Defining Financial Terms FIN/370 Jason Bruno May 11, 2011 Defining Financial Terms 2 Financial Terms 1. FINANCE: A branch of economic that deals with resource management ROLE: Finance is any area of study that helps get manage or invest the money. There is business finance, investment finance, home finance, car finance, and many other types. For most people managing their own money, personal finance is the most important type of finance. 2. Efficient Market: Market efficiency has varying degrees: strong, semi-strong, and weak stock prices in a perfectly efficient market reflect all available information. These differing levels,…show more content…
Also known as "new issue market" (NIM). 7. Stocks: A stock is essentially a share of ownership in a company. Owners of stocks receive part of the company's profits-or bear some of its losses-up to the amount of money they put into the stock. ROLE: Each stock represents a single share of ownership in a company. During the bank crisis in the United States, stocks for some banks, like Bank of America, dropped as low as $2.00 a share. This is an incredible opportunity for an investor to take advantage of a financial crisis that has great potential for turn around. However, for current stockholders Defining Financial Terms 5 it can be a time of great concern, and tremendous loss depending of course on how many shares they own. 8. Bond: It is a debt instrument that is issued for period extending over a year for the purpose of borrowing in order to raise capital. The federal government, states, cities as well as corporations all sell bonds. They constitute basically a promise to repay the principal along with interest on a maturity date. Not all bond pay interest, but the principal must be paid. ROLE: When an investor buys a bond he or she becomes a creditor of the issuer. However, unlike stock they have no ownership or equity rights. But, should a financial crisis occur the bond holder has a greater claim on an insurer’s income than would a stock
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