Glossary

Term Definition
Asset Anything having commercial or exchange value that is owned by a business, institution or individual.
Bond A loan, usually taken out by a government or company, which normally pays a fixed rate of interest over a given time period, at the end of which the loan is repaid.
Corporate bond Bonds issued by a company. They can offer higher interest payments than bonds issued by governments as they are often considered more risky.
Credit rating An independent assessment of a borrower's ability to repay its debts. A high rating indicates that the credit rating agency considers the issuer to be at low risk of default; likewise, a low rating indicates high risk of default. Standard & Poors, Fitch and Moody’s are the three most prominent credit rating agencies.
Deflation A general decline in prices, often caused by a reduction in the supply of money or credit or a decrease in government, personal or investment spending.
Dividend Dividends represent a share in the profits of the company and are paid out to a company’s shareholders at set times of the year.
Equities Shares of ownership in a company.
Inflation The rate of increase in the cost of living. Inflation is usually quoted as an annual percentage, comparing the average price this month with the same month a year earlier. There are two inflation indices in the UK – the Retail Prices Index (RPI) and the Consumer Prices Index (CPI).
Monetary policy A central bank's regulation of money in circulation and interest rates.
Quantitative easing The introduction of new money in to a country's money supply, by its central bank.
Yield This refers to the interest received from a bond and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.