Buka, Noraya S.

4BSAB-A

1. Investment has different meanings in finance and economics. In economics, investment is the accumulation of newly produced physical entities, such as factories, machinery, houses, and goods inventories. In finance, investment is putting money into an asset with the expectation of capital appreciation, dividends, and/or interest earnings. This may or may not be backed by research and analysis. Most or all forms of investment involve some form of risk, such as investment in equities, property, and even fixed interest securities which are subject, among other things, to inflation risk. 2. Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money,[1] or money earned by deposited funds. Interest is compensation to the lender, for a) risk of principal loss, called credit risk; and b) forgoing other investments that could have been made with the loaned asset. These forgone investments are known as the opportunity cost. Instead of the lender using the assets directly, they are advanced to the borrower. The borrower then enjoys the benefit of using the assets ahead of the effort required to pay for them, while the lender enjoys the benefit of the fee paid by the borrower for the privilege. In economics, interest is considered the price of credit. 3. Stock A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings. It (also capital stock) of an incorporated business constitutes the equity stake of its owners. It represents the residual assets of the company that would be due to stockholders after discharge of all senior claims such as secured and unsecured debt. Stockholders' equity cannot be withdrawn from the company in a way that is intended to be detrimental to the company's creditors. 4. Bond 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. These are commonly referred to as fixed-income securities and are one of the three main asset classes, along with stocks and cash equivalents. In finance, it is an instrument of indebtedness of the bond issuer to the holders. It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity.

It is also a written and signed promise to pay a certain sum of money on a certain date, or on fulfillment of a specified condition. All documented contracts and loan agreements are bonds. 5. Institutional investment is a kind of investment, which is done by a financialservices providing organization. The most common examples of institutional investments are insurance companies, a bank, a hedge fund, a retirement fund or a mutual fund. It is a form of financially advanced investment and it is invested in substantial volumes. Institutional investment portfolios normally have a large number of investments. 6. Portfolio investment is a passive investment in securities, which entails no active management or control of the securities by the investor. A portfolio investment is an investment made by an investor who is not particularly interested in involvement in the management of a company. The purpose of the investment is solely financial gain. It includes investment in an assortment or range of securities, or other types of investment vehicles, to spread the risk of possible loss due to below-expectations performance of one or a few of them It is also the provision of capital to a company in exchange for the possibility of earning a return on that capital if the company is profitable. Someone who makes a portfolio investment does not acquire any management interest in the company or any responsibility for the company's performance. A portfolio investment is a hands-off investment. 7. Financial plan is a series of steps or goals used by an individual or business, the progressive and cumulative attainment of which is designed to accomplish a financial goal or set of circumstances, e.g. elimination of debt, retirement preparedness, etc. This often includes abudget which organizes an individual's finances and sometimes includes a series of steps or specific goals for spending and saving future. This plan allocates future income to various types of expenses, such as rent or utilities, and also reserves some income for shortterm and long-term savings. A financial plan is sometimes referred to as an investment plan, but in personal finance a financial plan can focus on other specific areas such as risk management, estates, college, or retirement. It is also acomprehensive evaluation of an investor's current and future financial state by using currently known variables to predict future cash flows, asset values and withdrawal plans.

8. Equity valuation is determining the total value of a company involves more than reviewing assets and revenue figures. An equity valuation takes several financial indicators into account; these include both tangible and intangible assets, and provide prospective investors, creditors or shareholders with an accurate perspective of the true value of a company at any given time. The main purpose of equity valuation is to estimate a value for a firm or security. A key assumption of any fundamental value technique is that the value of the security (in this case an equity or a stock) is driven by the fundamentals of the firms underlying business at the end of the day. There are three primary equity valuation models: the discounted cash flow (DCF), cost and comparable approaches. 9. Efficient Portfolio a portfolio that provides the greatest expected return for a given level of risk (i.e., standard deviation), or, equivalently, the lowest risk for a given expected return Also a combination of investments that offer either the highest possible yield at a given risk level or the lowest possible risk at a given yield level. Although the concept of an efficient portfolio is important to understand, in practice it is more academic than practical.