AP Economics Chapter 27 Flashcards
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| 9109970289 | finance | the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk. | 0 | |
| 9109970290 | present value | the amount of money today that would be needed, using prevailing interest rates, to produce a given future amount of money. | 1 | |
| 9109970291 | future value | the amount of money in the future that an amount of money today will yield, given prevailing interest rates. | 2 | |
| 9109970292 | compounding | the accumulation of a sum of money in, say, a bank account where the interest earned remains in the account to earn additional interest in the future. | 3 | |
| 9109970293 | risk aversion | the tendency to choose options that entail fewer risks and less uncertainty, the willingness to sacrifice some economic payoff in order to avoid a potential loss | 4 | |
| 9109970294 | diversification | the reduction of risk achieved by replacing a single risk with a large number of smaller unrelated risks. | 5 | |
| 9109970295 | firm-specific risk | risk that affects only a single economic actor. | 6 | |
| 9109970296 | market risk | risk that affects all economic actors at once. | 7 | |
| 9109970297 | fundamental analysis | the study of a company's accounting statements and future prospects to determine its value. | 8 | |
| 9109970298 | efficient markets hypothesis | the theory according to which asset prices reflect all publicly available information about the value of an asset. | 9 | |
| 9109970299 | informationally efficient | reflecting all available information in a rational way. | 10 | |
| 9109970300 | random walk | the path of a variable whose changes are hard to predict. | 11 |