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Capital gain: refers to a profit earned Financial assets: is an asset such as cash,
from the sale of an asset/security which bonds and equity whose value comes from
has increased in value during the holding a contractual claim that is an amount that by
period. It is the profit obtained in the sale legal agreement must be paid periodically
of an asset as a result of an increase in the to the buyer of a security. Contractual
value of an asset. claim may also specify the time at which
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Contractual claim: is a specified amount the principal must be repaid.
that must be paid in accordance with the Shares and stock: A share is referred
legal agreement. For the case of a financial to as a unit of ownership which represents
asset, it is the amount that must be paid to an equal proportion of a company’s capital
LANGUAGE EDITING
the buyer or owner of a security periodically while a stock is the aggregation of shares
in accordance with the terms of the financial ownership in a company.
asset. Face value: This is known as the par value
or nominal value. Also face value is the
Dividend: refers to the distribution nominal or stated value assigned to each
of some of the company’s profit to its share by the company at the time of issuance.
shareholders as approved by the board of It represents the minimum price at which
directors of the company.
the share can be issued and is typically set
Inflation: is simply the general increase when the company is incorporated.
in price of goods and services, or a fall in Major categories of
the purchasing power of money.
investments
Investor: is a person who puts money into Generally, there are two major categories of
an entity or asset with an aim of getting investments including, financial assets and
financial returns. real assets. These can also be categorised as

Liquidity: refers to how easier an asset or trading investments and financial securities
security can be converted into cash without investments. Investment in financial assets,
affecting its market value. which is the focus of this chapter, is further
subdivided into two types which are equity-
Stock exchange: is also known as based investments and fixed income-based
stock market and is a centralised location investments. The following is Figure 4.1
(market) where the shares of publicly traded showing the major categories of investments
companies are bought and sold.
and their examples.

Student’s Book Form Five
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