Term
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Definition
| the field that studies financial decision making |
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Term
present value
PV = FV/(1 + r )N |
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Definition
| the amount that would be needed today to yield that future sum at prevailing interest rates. |
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Term
Future Value
FV = PV(1 + r )N |
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Definition
| the amount the sum will be worth at a given future date, when allowed to earn interest at the prevailing rate. |
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Term
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Definition
| the accumulation of a sum of money where the interest earned on the sum earns additional interest |
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Term
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Definition
| If a variable grows at a rate of x percent per year, that variable will double in about 70/x years |
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Term
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Definition
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Term
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Definition
| reduces risk by replacing a single risk with a large number of smaller, unrelated risks. |
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Term
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Definition
| affects only a single company |
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Definition
| affects all companies in stock market |
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Term
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Definition
the study of a company’s accounting statements
and future prospects to determine its value |
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Term
| Efficient Markets Hypothesis (EMH |
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Definition
| the theory that each asset price reflects all publicly available information about the value of the asset |
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Term
| informationally efficient |
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Definition
| Each stock price reflects all available information about the value of the company |
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Term
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Definition
A stock price only changes in response to new
information (“news”) about the company’s value |
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Term
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Definition
| a mutual fund that buys all the stocks in a given stock index |
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