Introduction to Personal Finance: Chapter 8 Investments

Flashcards covering key terms and definitions from Chapter 8 on Investments to aid in understanding personal finance concepts.

Stock

Ownership in a company represented by shares or equity.

Publicly traded stocks

Stocks that can be bought and sold on the stock market.

Privately held stocks

Stocks not available to the public and owned by a small number of individuals or family.

IPO (Initial Public Offering)

The first sale of stock by a company to the public to raise capital.

Bid price

The highest price a buyer is willing to pay for a specified number of shares.

Ask price

The lowest price a seller is willing to accept for a share of stock.

Earnings Per Share (EPS)

A company's profit divided by the outstanding shares of its common stock.

Growth stocks

Stocks focused on stock price appreciation.

Income stocks

Stocks that pay out a large portion of earnings in dividends.

Market Capitalization

The total market value of a company's outstanding shares.

Discounted Dividend Valuation Model

A method for valuing a company's stock based on the present value of future dividends.

Equilibrium

The point where the supply and demand for an asset are equal.

Diversification

The practice of spreading investments to reduce risk.

Systematic Risk

Risk that cannot be eliminated through diversification, associated with the market.

Unsystematic Risk

Risk that can be reduced through diversification.

Real Estate Investment Trust (REIT)

A company that owns, operates, or finances income-generating real estate.

Hedge Funds

Investment funds that pool capital from accredited individuals and invest in a variety of assets.

Brokerage Account

An account with a broker that allows investors to buy and sell assets.

Limit Order

An order to buy or sell a stock at a specified price.