Financial Markets
Capital gain
An increase in the market value of an asset
Corporation
A business organization having a continuous existence independent of its members (owners) and power and liabilities distinct from those of its members
Bond
A certificate acknowledging a debt and the amount of interest to be paid each year until repayment; an IOU
Retained earnings
Amount of corporate profits not paid out in dividends
Dividend
Amount of corporate profits paid out for each share of stock
Default
Failure to make scheduled payments of interest or principal on a bond
Financial intermediary
Institution (e.g., bank or the stock market) that makes savings available to dissavers (e.g., investors)
Coupon rate
Interest rate set for a bond at time of issuance
Corporate stock
Shares of ownership in a corporation
Liquidity
The ability of an asset to be converted into cash
Risk premium
The difference in rates of return on risky (uncertain) and safe (certain) investments
Par value
The face value of a bond; the amount to be repaid when the bond is due
Initial public offering (IPO)
The first issuance )sale to the general public of stock in a corporation
Price/earnings (P/E) ratio
The price of a stock share divided by earnings (profit) per share
Expected value
The probable value of a future payment, including the risk of nonpayment
Current yield
The rate of return on a bond' the annual interest payment divided by the bond's price
Present discounted value (PDV)
The value today of future payments, adjusted for interest accrual