investment
the act of redirecting resources from being consumed today so they may create benefits in the future; the use of assets to earn income.
financial system
the system that allows the transfer of money between savers and borrowers.
financial asset
claim on the property or income of a borrower.
financial intermediary
institution that helps channel funds from savers to borrowers.(Life Insurance companies.)
mutual fund
fund that pools the savings of many individuals and invests this money in a variety of stocks, bonds, and other financial assets.
diversification
spreading out investments to reduce risk.
portfolio
a collection of financial assets.
prospectus
an investment report to potential investors.
return
the money an investor recieves above and beyond the sum of money initially invested.
coupon rate
the interest rate that a bond issuer will pay to a bondholder
maturity
the time at which payment to a bondholder is due.
par value
the amount that an investor pays to purchase a bond and that will be repaid to the investor at maturity.
yield
the annual rate of return on a bond if the bond were held to maturity.
savings bond
low denomination bond issued by the U.S. Gov.
muncipial bond
a bond issued by a state/local gov. to finance improvements like state buildings, libraries, parks, and schools.
corporate bonds
a bond that a corporation issues to raise money to expand its business.
Securities and Exchange Commission
an independent agency that regulates financial markets and investment companies.
junk bond
a lower-rater, potential higher-paying bond.
capital market
market in which money is lent for periods longer than a year
money market
market in which money is lent or periods less than a year
primary market
market for selling financial assets that can only be redeemed by the original holder
secondary market
market or reselling financial assets
share
portion of stock
equities
claims of ownership in a corporation
capital gain
the difference between a high selling price and lower purchase price resulting in a financial gain for the seller.
capital loss
the difference between a lower selling price and a higher purchase price resulting in a financial loss to the seller.
stock split
the division of a single share of stock into more than one share
stockbroker
a person who links buyers and sellers of stock
brokerage firms
a business that specializes in trading stocks
stock exchange
a market for buying and selling stock
OTC market
an electronic marketplace for stocks and bonds.
NASDAQ
American Market for securities
futures
contracts to buy or sell at a specific date in the future at a price specified today
options
contracts that give investors the choice to buy or sell stock and other financial assets
call option
the option to buy shares of stock at a specified time in the future
put option
the option to sell shares of stock at a specified time in the future
bear market
a steady drop in the stock market over a period of time
The Dow
index that shows how certain stocks have traded
S and P 500
index that shows the price changes of 500 different stocks
Great Crash
the collapse of the stock market in 1929.
speculation
the practice of making high risk investments with borrowed money in hopes of getting a big return