Week 1 Assignment Fin370 Essay

384 Words2 Pages
o Finance: o - 4 basic principles  Money has a Time value  There is a risk-return trade-off  Cash flows are the source of value  Market prices reflect information  The study of how people/businesses evaluate finance and increase capital to fund them. o Efficient market o - Market Hypothesis’  Weak-form  Semi-strong  Strong-form  A market in which all the information is completely incorporated into securities prices and returns to the investors will earn. o Primary market  The market where new securities are bought and sold for the first time.  Corporations and firms raise money by selling securities o Secondary market  Where all subsequent trading of previously issued securities are sold and bought between investors. o Risk  Taking a chance or risk by investing in an investment in the prospect that it will have a monetary return.  An investor who seeks a higher return must be willing to accept a higher level of risk. o Security  A negotiable instrument that represents a financial claim.  A security is any interest, certificate of interest, claim to, or right to purchase something of value. i.e. stock, preferred stock, bonds, shares, UIT’s, and limited partnership units. o Stock  Units of securities that represent ownership interest in a corporation or firm. Common stock is an equity security. o Bond  A debt security that represents money loaned to a corporation.  Usually a debt that has a maturity date longer than 10 years. o Capital  Stocks, bonds, or mutual funds are forms of capital.  The value of securities o Debt  To owe. Bonds are forms of debt that a corporation issues for more capital to grow.  Money that has been barrowed and must be paid back. o Yield  Found by calculating annual dividend by the current market price. Used to show the how much an investor will receive
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