Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
15 Cards in this Set
- Front
- Back
finance
|
the field that studies how people make decisions regarding the allocation of resources over time and handling risk
|
|
preset value
|
the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money
|
|
future value
|
the amount of money in the future that an amount of money today will yield, given prevailing interest rates
|
|
compounding
|
the accumulation of a sum of money in, say, a bank account, where the interest earned remains in the account to earn additional interest in the future
|
|
Formula for finding amount of interest gained in a certain number of years
|
X/(1+r)^N
X = current amount r = rate N = years |
|
Rule of 70
|
70/x ... how long to double
x = interest rate per year |
|
risk aversion
|
a dislike of uncertainty
|
|
diversification
|
the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated ones
|
|
firm-specific risk
|
risk that affects only a single company
|
|
market risk
|
risk that affects all companies in the stock market
|
|
fundamental analysis
|
the study of a company's accounting statements and future prospects to determine its value
|
|
efficient market hypothesis
|
the theory that asset prices reflect all publicly available information about the value of an asset
|
|
informationally efficient
|
the description of asset prices that rationally reflect all available information
|
|
random walk
|
the path of a variable whose changes are impossible to predict
|
|
Is the stock market informationally efficient?
|
NO. irrational psychological factors affect prices in the market
|