Fin 370 Week 1 Essay

517 WordsJul 9, 20123 Pages
Defining Financial Terms Kyle O. Flinn FIN/370 June 11, 2012 Marilyn Waters Defining Financial Terms * Finance – Is the management of revenues; the conduct or transaction of money matters generally, especially those affecting the public, as in the fields of banking and investment. Role - Finance is how investors assign their assets over time under circumstances of certainty and uncertainty. Efficient market - An investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. Role - Proclaims that financial markets are "information ally efficient". Primary market – A market that issues new securities on an exchange. Role - The market that is part of the capital markets that deals with the issuance of needs of securities. Secondary market - A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. Role - Also called aftermarket, is the financial market in which formerly issued financial instruments such as stock, bonds, options, and futures are bought and sold. Risk - The potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). Role - Chance that an investment’s actual return will be better than expected. It includes the possibility of losing some or all of the original investment. Security - Is the degree of protection against danger, damage, loss, and crime. Role – Is the way to insure money or investments from total loss. Stock - The capital market (or simply stock) of a business entity represents the original capital paid into or invested in the business by its founders. Role - Type of security that shows ownership in a corporation and represents a claim on part of

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