Impact of 9/11 and Bin Laden’s Death on Pakistan and United States Stock Exchange Market and the Consequent Changes in the Economic Sector

Topics: Stock exchange, Stock market, Stock Pages: 16 (4704 words) Published: June 8, 2013
CHAPTER 1

STOCK EXCHANGE

1.1 Key Terms in Stock Exchange

Shares: A company divides its capital into units of equal denomination which are offered for sale to raise capital.

Stock: The capital stock (or just stock) of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to harm the creditors. The stock of a business is divided into shares, the total of which must be stated at the time of business formation.

Bonds: A bond is a formal contract to repay borrowed money with interest at fixed intervals. Thus a bond is like a loan: the issuer is the borrower (debtor), the holder is the lender (creditor), and the coupon is the interest. Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure.

Securities: A security is generally a negotiable financial instrument representing financial value such as, banknotes, bonds and debentures and common stocks.

Dividends: Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Derivative: In finance, a derivative is a financial instrument whose value depends on other, more basic, underlying variables.

Trader: In finance, a trader is someone who buys and sells financial instruments such as stocks and bonds.

Stock broker: A broker is a party or person that arranges transactions between a buyer and a seller and gets a commission when the deal is executed. A stock broker is a regulated professional who buys and sells shares and other securities through market makers or Agency Only Firms on behalf of investors.

1.2 What is Stock Exchange?

A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and dividends. Securities traded on a stock exchange include shares issued by companies, derivatives, and bonds.

A stock market or equity market is a public (a loose network of economic transactions, not a physical facility or discrete) entity for the trading of company stock (shares) and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The stock market Index is a number that measures the relative value of a group of stocks. Every stock exchange has its own index, comprising of the companies listed on it. As the stocks in this group change value, the index also changes value. If an index goes up by 1% then that means the total value of the securities which make up the index have gone up by 1% in value. A stock index is a compilation of stocks constructed in such a manor to track a particular market, sector, commodity, currency, bond, or other asset. For example, the Gold and Precious Metals Index (XAU) consists of companies that mine gold and other precious metals. The logic is that if you buy the stocks in the index, you will gain exposure to the gold mining sector without having to buy shares in every single gold mining company in the world. The shares in the XAU are representative of the gold mining industry as a whole.

Stock market index point: A point in a market index is a concept used to measure the value of the securities listed in the index. When referring to stocks and stock market indexes, a "point" is equivalent to $1.

1.3 The role of stock exchange

Stock exchanges have multiple roles in the economy. This may include the following:

Raising capital for business: The Stock Exchange provides companies with the facility to raise capital for expansion through selling shares to the investing public.

Mobilizing savings for...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Economic Impact of 9/11 on Pakistan Essay
  • Stock exchange of islamabad Pakistan Essay
  • Introduction to Stock Markets in Pakistan Essay
  • Impact 9-11 caused United States America Essay
  • Derivative and Its Impact on Stock Market Research Paper
  • Impact of Forein Reserves on Karachi Stock Exchange Market Essay
  • stock exchange Essay
  • The Stock Market is a Example of Perfect Competition Essay

Become a StudyMode Member

Sign Up - It's Free