The charge for the privilege of
borrowing money, typically
expressed as an annual percentage
Interest is commonly calculated
using one of two methods: simple
interest calculation, or compound
Interest that accrues on the initial
principal and the accumulated interest of
a principal deposit, loan or debt.
Compounding of interest allows a
principal amount to grow at a faster rate
than simple interest, which is calculated
as a percentage of only the principal
At some point, just about every company needs to
raise capital, whether to open up a West Coast
sales ofﬁce, build a factory, or hire a crop of
In each case, they have two choices: 1) Borrow the
money, or 2) raise it from investors by selling them
a stake (issuing shares of stock) in the company.
When you own a share of stock, you are a part
owner in the company with a claim (however small
it may be) on every asset and every penny in
the capital raised by a business or
corporation through the issue and
subscription of shares.
shares of a company that a person
Nevertheless, it's that ownership
structure that gives a stock its value. If
stockowners didn't have a claim on
earnings, then stock certiﬁcates would be
worth no more than the paper they're
printed on.As a company's earnings
improve, investors are willing to pay
more for the stock.
A debt investment in which an investor loans money
to an entity (corporate or governmental) that
borrows the funds for a deﬁned period of time at a
ﬁxed interest rate. Bonds are used by companies,
municipalities, states and U.S. and foreign governments
to ﬁnance a variety of projects and activities.
Bonds are commonly referred to as ﬁxed-income
securities and are one of the three main asset classes,
along with stocks and cash equivalents.
Two features of a bond - credit quality and duration -
are the principal determinants of a bond's interest
rate. Bond maturities range from a 90-day Treasury bill
to a 30-year government bond. Corporate and
municipals are typically in the three to 10-year range.
An investment vehicle that is made up of a pool of
funds collected from many investors for the purpose
of investing in securities such as stocks, bonds, money
market instruments and similar assets. Mutual funds
are operated by money managers, who invest the
fund's capital and attempt to produce capital gains and
income for the fund's investors.A mutual fund's
portfolio is structured and maintained to match the
investment objectives stated in its prospectus.
One of the main advantages of mutual funds is that
they give small investors access to professionally
managed, diversiﬁed portfolios of equities, bonds and
other securities, which would be quite difﬁcult (if not
impossible) to create with a small amount of capital.
A security that tracks an index, a commodity or a
basket of assets like an index fund, but trades like a
stock on an exchange. ETFs experience price changes
throughout the day as they are bought and sold.
What are the
JONES, S&P 500?