Stock Market Flashcards
investment
the act of redirecting resources from being consumed today so that they may create benefits in the future; the use of assets to earn income or profit
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
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 receives above and beyond the sum of money initially invested
credit risk
borrowers may not pay back the money they have borrowed, or they may be late in making payments
liquidity risk
you may not be able to convert the investment back into cash quickly enough for your needs
inflation rate risk
inflation rates erode the value of your assets
time risk
you may have to pass up better opportunities for investment
coupon rate
the interest rate that a bond issuer will pay to a bond holder
maturity
the time at which payment to the 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
municipal bond
a bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks and schools
