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Define Financial Terms and their Role in the Financial World

Define the following terms and identify their roles in finance:

o Efficient market
o Primary market
o Secondary market
o Risk
o Security
o Stock
o Bond
o Capital
o Debt
o Yield
o Rate of return
o Return on investment
o Cash flow

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Answer:

Efficient market: Efficient market can be defined as the market in which the price of securities equals its investment value at all the times. In an efficient market the information related with the security is fully reflected in the price of the security. As far as role of efficient market in finance is concerned it is a type of financial market where investors trade in securities or assets.

Primary market: Primary market is the market where corporate debt and equity are issued. It has a great importance in finance when companies require capital and investor require investment opportunities the primary market provides the plat form for both of them. IPOs and bonds are issued in the primary market.

Secondary market: Secondary market is a market for the existing financial securities ...

Solution Summary

This solution defines financial terms and their role in the financial world.

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