Key Terms
Core principle
Higher risk = higher expected return. Lower risk = lower expected return.
Budgeting
Planning for sources and uses of cash; usually done before the year starts; sets objectives.
Forecasting
Adapts the budget when actual results differ from expectations; navigates the detours.
BLS data
Median finance income = $72,250 vs. overall median of $41,950.
Financial Analyst
Market research, financial forecasting, modeling, cost analysis, comparative valuations. Works with multiple departments
Business (Management) Analyst
Similar to financial analyst but less quantitative; stronger emphasis on strategic thinking, process improvement, and co
Primary market
Market for new securities. Cash flows go directly to the issuing firm.
Examples
Commercial banks, mutual fund companies, credit unions.
Key advantage
If a borrower defaults on a loan the bank created from your deposit, your deposit is still protected. Intermediaries abs
Disintermediation
Savers bypassing intermediaries to invest directly.
Treasury Notes
Maturities of 2 to 10 years; pay semiannual coupon interest; pay face value at maturity; generally exempt from state and
Treasury Bonds
Maturities of 20 or 30 years; same structure as notes (semiannual coupon plus face value at maturity); higher coupon rat
Municipal Bonds (Munis)
Issued by state and local governments; interest always exempt from federal taxes; sometimes exempt from state and local
Corporate Bonds
Issued by corporations for long-term financing; governed by an indenture (bond contract); non-standardized features requ
Stocks
Represent ownership in a corporation; cash flows (dividends, resale price) are more uncertain than bonds; no contract gu