Summary of Fincyclopedia - Chapter 1

Abnormal Return

Abnormal return is the return on a stock over and above the expected return as per the market movements. This can happen when an investment yields more returns than initially anticipated. Additionally, the concept of add on loans is explained, where the total interest due on a loan is added to the principal amount to calculate periodic payments. Moreover, the importance of audit in reviewing a company's financial statements for accuracy and fairness is highlighted.

Annual Return and Arbitrage

Annual return is defined as the financial gain an investment yields over a year, including dividends, interests, and capital appreciation. It serves as a key metric for comparing investment performance. On the other hand, arbitrage involves simultaneous buying and selling of an asset in different markets to profit from price discrepancies. The process of assignment, appreciation, and asset allocation are also discussed in this chapter.

Accrued Interest and Annuity

The concept of accrued interest, where interest income has been incurred but not yet received, is explained. Annuity, a financial product that provides regular payments, especially for retirement, is also elaborated upon. Moreover, the chapter delves into accrual accounting, agency bonds, and absolute return, shedding light on different financial terms and practices in the realm of finance.

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