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In Chapter 6 we discussed the basic methods used to value future cash flows. In this chapter we will apply those methods for valuing bonds and stocks. In addition, we will introduce some of the terminology used in these areas and describe how the financial press reports the prices of these assets.
- Bid
- Ask
- Spread
- Buy
- Sell
- Stock Symbol / Ticker
- Annual Reports
- Bull Market
- Bear Market
- Volatility
As explained in the previous article, stock prices are determined at the equilibrium point between the demand and supply curves for that particular stock. In a more practical sense, trades are executed when the price at which someone is willing to sell their shares is less than or equal to the price at which someone is willing to buy them. In this ...
The asking price is the exact opposite of the bid price, as in, it is the price at which sellers are willing to sell their shares of a particular company. When there is a match between the bid and ask prices, trade is carried out. There are several buyers and sellers for any stock at any given point in the market, and therefore bid and ask prices c...
When you are trading stocks, you will deal with people you have never met in your life. Therefore, barring a lucky coincidence, it is quite likely that the bid and ask prices will not be identical. The difference between the bid and ask price when a trade is executed is called the spread on that particular trade. But where does this spread go? The ...
There are two parts to the execution of a trade, buying and selling. These can be done in any order, and the trade will be profitable if the buying is done at a lower price and selling at a higher price. Buying is the act of purchasing shares of a company, and it is usually the first part of any trade, also called “taking a position in the company”...
Selling is the second half of a buy trade, and as the name suggests, it refers to the sale of the shares that you purchased earlier. This can be done in one of two situations: 1. When share prices have gone up, and you wish to sell your shares to book a profit. 2. When the share prices are falling, you wish to sell your shares to minimize your loss...
While trading different stocks day in and day out, it might not be easy or convenient for you to remember the names of all the companies you have positions in. For this reason, whenever companies register with the stock exchange, they are allotted a ticker/symbol representing the company. For example, Apple’s ticker is AAPL, Alibaba’s ticker is BAB...
As a shareholder, you’re a part-owner in the company, and therefore you’re entitled to know how the company is doing financially. Because shareholders of the company keep changing daily as the shares are traded in the market, companies found an easier way to let everyone know their financial position. At the end of every accounting period, say a ye...
The stock market can go in one of two directions: it will either go up or down. During a given time period, if the market is consistently going upwards, it is said to be a bull market. In macroeconomic terms, this is said to be a period of economic boom and prosperity since companies are doing well. Subsequently, any individual or corporation that ...
A bear market is the opposite of a bull market; in any period where the markets are consistently going downwards, it is a bear market. This generally coincides with times of recessions, and the economy as a whole starts performing poorly in bearish markets since companies no longer have the confidence of their shareholders. Subsequently, any indivi...
On any given day, stock prices move up and/or down. The extent to which these prices change depends on the demand and supply for the particular stock. The volatility of a stock is the measure of how much prices move up and down in a given time period. Highly volatile stocks see large fluctuations daily and are often characterized as high-risk, high...
In this tutorial we will cover the practice of investing from the ground up. The world of finance can be extremely intimidating, but we firmly believe that the stock market and greater financial world won't seem so complicated once you learn some of the lingo and major concepts.
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For Equities, a company’s size (market capitalization) and whether the company is considered Growth or Value determine a stock’s style. International stocks are typically broken down into Developed and Emerging Markets. Samples can be seen below and will be further defined later in the glossary.
Jun 3, 2020 · Investment involves sacrificing presently owned resources such as time, money, or energy with the objective of attaining greater rewards in the future (Laopodis, 2020).
basics of investing, including asset classes, stocks vs. bond. engagements can be challenging enough—let alone finding time to create an investment plan. But creating an in.
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Underlying rights or interests include bonds and loans, which involve interest rate, credit, and currency risks, and commodi-ties and equities, which involve price risks.
