Buka, Noraya S. 4BSAB-A 1. Investmenthas different meanings in finance andeconomics.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 capitalappreciation,dividends,and/orinterest 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 inflationrisk.2. Interestis afee paid by a borrower ofassets 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. Interestis compensation to the lender, for a) risk of principal loss, called credit risk;and b) forgoing otherinvestments 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. StockA 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 anincorporated business constitutes theequity 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 Stockholders' equity cannot be withdrawn from the company in a way that is intended to be detrimental to the company's creditors. 4. BondA debt investment in which an investor loa ns 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. Infinance,it is an instrument of indebtedness of the bond issuer to the holders. It is a debtsecurity,under which the issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay them interest (thecoupon)and/or to repay the principal at a later date, termed the maturity.
