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Find out more about this frequently referenced, but often misunderstood, term used to describe the price at which a stock is bought or sold at.
The wealth effect is a psychological phenomenon that causes people to spend more as the value of their assets rises. The premise is that when consumers' homes or investment portfolios increase in value, they feel more financially secure, so they increase their spending.
The discount rate is the interest rate you need to earn on a given amount of money today to end up with a given amount of money in the future. Let's say you need $1,000 one year from now to go on vacation. We can use the discount rate to determine how much money you would need to have today to have $1,000 in one year.
Most investment choices involve a tradeoff between risk and reward. The "Efficient Frontier" is a modern portfolio theory tool that shows investors the best possible return they can expect from their portfolio, given the level of volatility they're willing to accept.
Weighted average cost of capital may be hard to calculate, but it's a solid way to measure investment quality
A market maker is a firm or an individual that stands ready to buy and sell a particular security throughout the trading session to maintain liquidity and a fair and orderly market in that security. Sometimes, no one may be selling a stock that you're interested in buying, or no one may be bidding on a stock that you're trying to sell.
Learn about the differences between these two words and how each one is used in the stock market.
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