Financial Terms and Roles

Finance: the management of money

Efficient Market: unbiased estimate of the value of the investment

Primary Market: market that issues new securities on an exchange

Secondary Market: "investors purchase securities and/or assets from other investors, instead of issuing companies themselves" (Investopedia, 2012). A secondary market is reliable for getting money to an investor instead of a company.

Risk: the chance investors take when lending that their money will not be repaid. This is something that all lenders take when giving a loan to a person, that person may never return the money that was borrowed therefore the lender is taking a risk.

Security: "an instrument representing ownership, a debt agreement, or rights to ownership" (Investopedia, 2012). Security is something that all lenders have when lending to a consumer to protect their products.

Stock: stock is the representation of ownership of a piece of a company. This is important in finance because if a company is going to better their items they need investors who purchase stocks.

Bond: a debt investment when an investor borrows money, like a loan, to a company or a person at a fixed rate for a particular amount of time, also known as fixed-income securities.

Capital: value of ones assets. This is needed in finance to find out how much a product is worth so the lender knows how much to borrow and the investor knows how much to borrow as well.

Debt: the amount of money that a borrower owns a lender. This is particular important in the finance business so both the lender and the borrower know how much is owed.

Yield: income return on an investment (Investopedia, 2012). This is the interest received on an investment and is usually calculated annually by form of percentages.

Rate of Return: "discount rate used in capital