fin 370 week 1

fin 370 week 1

University of Phoenix Material


Define the following terms using your text or other resources. Cite all resources consistent with APA guidelines.

Resource you used
Time value of money
The idea that a dollar today is worth more than a dollar in the future, because the dollar received today can earn interest up until the time the future dollar is received.

Efficient market
Market where all pertinent information is available to all participants at the same time, and where prices respond immediately to available information. Stockmarkets are considered the best examples of efficient markets.

Primary versus secondary market
Primary vs. secondary market says that the primary market deals with the newly issued securities while the secondary market deals with already traded securities. When the companies issue securities in the primary market, they collect funds directly from the investors through the securities sales. But, in the secondary market the money earned from is the reason that riskier bonds pay higher coupons than other bonds. It is also the reason that bonds pay lower returns than most stocks because they are a less risky investment. The Markowitz Portfolio Theory attempts to mathematically identify the portfolio with the highest return at each level of risk. selling a security does not go to the company. The money thus earned goes to the investor who sells the security.
Risk-return tradeoff
The concept that every rational investor, at a given level of risk, will accept only the largest expected return. That is, given two investments at the exact same level of risk, all other things being equal, every rational investor will invest in the one that offers the higher return. The risk-return tradeoff is pervasive throughout...

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