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Fin/370 - Week 1 Definitions

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Definitions

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

TERM: Time value of money
DEFINITION: Price put on the time an investor or lender has to wait until the investment or loan is fully recouped.
RESOURCE: (Business Dictionary., 2014).

TERM: Efficient market
DEFINITION: The prices of financial claims traded in the public financial markets respond rapidly to the release of new information. Thus, when earnings reports come out, prices adjust immediately to the new information, moving upward if the information is better than expected and downward if it is worse than expected
RESOURCE: (Business Dictionary., 2014).

TERM: Primary versus secondary market
DEFINITION: Primary markets are tailored to a company's particular needs and is conducted either by you or by a company that you pay to conduct the research for you.
Secondary markets are based on information from studies previously performed by government agencies, chambers of commerce, trade associations, and other organizations.
RESOURCE: All Business, (2014).

TERM: Risk-return tradeoff
DEFINITION: We won’t take on additional risk unless we expect to be compensated with additional return.
RESOURCE: (Business Dictionary., 2014).

TERM: Agency (principal and agent problems)
DEFINITION: A firm’s common stockholders, the owners of the firm, are the principals in the relationship, and the managers act as “agents” to these owners. If the managers have little or no ownership in the firm, they have less incentive to work energetically for the company’s shareholders and may instead choose to enrich themselves with perks and other financial benefits.
RESOURCE: (Mayo, 2012, chapter 1)

TERM: Market information and security prices and information asymmetry
DEFINITION: Marketing information - the…...

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