How Interest Rates Work

If you want to purchase something now but do not have the cash to spend, what you can do is to borrow it. This borrowing does have a cost though, it is called interest. It is an amount that you have to pay on top of the money you have loaned-- the principal amount. The [...]

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What is Inflation and How Does it Work?

Inflation affects people from all walks of life--quite significantly that even your entire retirement fund can suffer if there is an unprecedented rise in inflation rate. Inflation shows how the value of money decreases over time. While it is often seen as economic, it can in fact be as real as the size of a [...]

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Using Price-to-Book Ratio to Evaluate Stocks

The price-to-book ratio is another ratio used in investing, mostly by value investors. It is one of those indicators they use to determine the value of a stock and how much more of it they can benefit from. This article elucidates the full definition of price-to-book ratio and how one can use it in his [...]

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How to Read a Company’s Financial Statement

In stock investing, it is important to base your decisions on sound analysis of the company’s performance and growth prospects. This is not possible without going through the nitty-gritty of a company’s financial statement. For instance, you need to know if it is generating revenues from its core businesses operation or if it has enough [...]

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What is a Derivative and How Do They Work?

You may hear about derivatives over the evening news quite often. However, these jargons are rarely explained in layman’s terms when mentioned in financial news.  But what are derivatives exactly and how are these being used?  Read through this brief explanation on derivatives to learn more about such a financial term. A derivative is referred [...]

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What is a Bond and How do Bonds Work?

A bond refers to a debt security that pledges to make regular payments for a specified period of time. If you are wondering what a security is, it is a claim or entitlement on the issuer’s future assets or income. If you buy a bond, you are simply lending money in return for interest payments [...]

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What is the Risk-Free Rate and How Can It Be Used to Guide Your Investment Decisions

In investment, there is this term called risk-free rate of return.  In a relatively stable economic environment, the risk-free rate offers the minimum return that one can yield without taking on any risk (ie, a risk-free investment).  But what is it really and how can it be used by a stock investor to make investment [...]

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Why Do Recessions Happen?

We hear the word recession all the time?  But what is it and why do recessions happen?  The impact of an economic recession is utterly wide-ranging. Depending on its nature and extent, a recession's effects can be huge or minimal, direct or indirect. In any case, a recession is something that everyone should care to know [...]

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