Asymmetric Information

  

Asymmetry happens when two sides of something aren't equal. Think: fiddler crabs. In the financial world, asymmetrical information exists when one side of a transaction has more information about stocks, bonds or securities than another.

Example: Insiders may get some information about their company and then sell or trade stocks before other shareholders get wind of the same info. It's illegal. Do not do it. We love Orange is the New Black, too, but no one looks good in prison colors.

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Finance: What are Bonds?393 Views

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Finance a la shmoop what is a bond? well a bond is your word your promise your [Women shake hands]

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handshake your John Hancock on a contracted piece of paper your mortgage

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your credit card debt yeah their bonds to your "I swear I'm not a deadbeat"

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declaration... that's your bond right well bonds come [Man lying on a sofa]

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in many complex flavors and compositions simply put bonds are loans aka debt you

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borrow money or you promise or you you bond that

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you'll pay it back when you borrow money the amount you borrow is called the

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principal you pay rent on that amount borrowed and that rent is called [rent appears at bank]

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interest to the entity loaning you the money that interest is called yield

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thank you very much for the yield like if the lender rents you a grand for a

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year and you pay them a thousand 80 bucks at year-end paying back the

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principal and then the rent on the money while the lender will have had a yield [Yield of lender appears]

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of 8% on the grand that they loaned you so that's a bond you borrow money you

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pay it back and if you don't the person who loaned you the dough well they [Person stamped with property of shmoop bank]

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generally own your tuchus and yeah you know what Shakespeare said about bonds

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yeah that's what he said so if you don't really know what you're doing don't do

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it...

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