Financial Algebra Unit 5 - Intro to Investing & Exponential Functions

Bond

A security in which the investor loans money to a company or government, which then pays regular interest to the bondholder and returns the principal on the bond's maturity date

Bond Rating

A measurement of the likelihood that a bondholder will be paid back

Asset Class

A group of financial instruments which have similar financial characteristics and behave similarly in the marketplace (like stocks, bonds, and cash)

Bear Market

A market in which prices are falling, encouraging selling

Bull Market

A market in which there is increased stock trading and rising stock prices

Compound Interest

Reinvesting earned interest back into the principal to allow money to grow exponentially over time

Coupon

The annual interest payment on a bond, usually expressed as a percentage of its face value

Diversification

The practice of investing in a large variety of stocks, bonds, and/or funds as a way to as a way to reduce your overall risk

Dividend

Money from the profits of a company that is paid out to its shareholders, typically on a quarterly basis

Exponential Function

y=ab^x

Exponential Decay

A decrease at a rate proportional to its current value

Exponential Growth

Growth whose rate becomes ever more rapid in proportion to the growing total number or size

Growth Factor

The value by which a quantity multiplies itself over time

Inflation

The rate at which the price of goods increases and consumer purchasing power decreases over time

Investing

The process of setting money aside to increase wealth over time for long-term financial goals such as retirement

Nasdaq

The second largest stock exchange in the world behind the NYSE

New York Stock Exchange (NYSE)

The world's largest stock exchange, physically located in New York City

S&P 500

An index of 500 large cap companies chosen based on their size, industry, and other factors, used to represent the entire market

Stock

A share of the value of a company, which can be bought, sold, or traded as an investment and which gives the investor small partial ownership of the company

Stock Exchange

A market where shares in corporations are bought and sold through an organized system