an investment
When purchasing an asset that generates a return, it is generally considered to be this
avoiding risk
it is hard to achieve a positive real return by avoiding risk all together
capital gain
purchasing a machine or stock or real estate more than 1 year ago and then selling for a profit
capital gains tax rate
when it comes to taxes, these are better than ordinary earned income tax rates
common stocks
A man has a high risk tolerance and goes for earning a 24 % return on his money. The only way he can reach this level of return is to invest in this type of stocks
coupon interest
This rate is the interest to be paid annually on a bond as a percentage of par value.
default risk
This risk premium is the additional investment return required to compensate investors for risking that the issuer may not pay the interest or principal on a security.
diverse portfolio
owning stocks, bonds, real estate, gold coins, T-Bills, and gemstones.
dividends
a return on stock investment, which is a portion of the company's profits
exchange rate risk
You have just purchased a large amount of foreign bonds. The variability in earnings that you might experience as the relationship between the foreign currency and the U.S. dollar fluctuates is called this kind of risk
financial risk
If a particular corporation has a high use of debt, it is most likely that this firm also has a high risk of this type
investment ally
As a young college graduate, your biggest investment ally is time
lending investments
Usually you know ahead of time exactly what your return will be
liquidity risk premium
at an investment might not be able to be converted into cash quickly at a fair market price. You would likely expect this premium on this investment.
maturity
This date is the date at which the borrower must repay the loan or borrowed funds.
ownership investments
a successful friend told you to invest in stocks and income-producing real estate. Both of these are examples of these investments.
par value
the stated amount on the face of a bond, which the firm is to repay at the maturity date.
political & regulatory risk
type of investment that would have a high risk premium associated with this risk would include tobacco companies, drug companies, and casino companies
portfolio
An investor's ownership of different company's stocks, rental houses, and government bonds.
rate of return
add accumulated dividends plus appreciation and divide by basis
real rate of return
nominal rate of return minus the inflation rate
Share holders
These Investors will potentially receive dividends on their investments
speculation
You are considered to be engaging in this when you purchase an asset whose value depends solely on supply and demand such as baseball cards or Beany Babies
systematic risk
That portion of a stock's risk or variability that cannot be eliminated through investor diversification is called this risk.
very short-term T-Bills
These are virtually risk-free & the interest rate on them can be thought of as a real risk-free rate.