1. GDP & GNP
Many are not clear with what Growth Domestic Product(GDP) stands for but not exactly how does it differ from Growth National Product(GNP). The contrast is fairly simple. GDP dictates the total value of a country’s production and services by both the locals and the foreigners within a boundary over a year while GNP exhibits the value of products and services by the citizens of the country anywhere in the world (it's land or foreign land) over the year.
2. Inflation
Grandparents’ be saying “Do you know back in the old days, your grandpa only needs RM1 to survive a day out there and here you are asking RM50 for your daily expenses?” This is inflation: a general increase of price level in the economy reducing consumers’ purchasing power. You can come up with a response something along the lines of, “Yes, grandpa but RM1 now can only buy a maximum of two lollies, you need roughly RM8 to buy a decent meal."
3. Base Rate
In case any of you were wondering if it was supposed to be Base Lending Rate (BLR), you may have not been aware that our financial framework has been slightly tweaked. As of January 2015, a new base rate has been published. Don’t worry! Only a slight change in monetary policy, i.e. interest rate was spotted. Instead of ‘BLR-x’, it’s “BR+spread”. Its aim is to promote transparency and dismiss information asymmetry. To learn more about our new base rate and the latest effective interest rates, click here.
4. Broker
A broker is a licensed individual or firm acting as an agent for a customer to participate in buying and selling of products such as securities or properties. In exchange for their services, they are provided with a commission. For a broker in real estate, their main duties cover advertising properties, specifying the market values, displaying properties to buyers and proposing the best outcome for the clients.
5. Options/ Warrants
These terms would be fairly new to most people but if it’s not, good on you! Options are contractual agreements between two parties that gives the holder the right, no obligation to buy or sell stocks at a predetermined price and price.
There are two types of options: Call or Put options. Call Options to give you the right to buy stocks while put options allow stocks to be sold.
Here’s the tricky math part: Stay with me! Say, there is a stock X trading at $4. A call option for this stock with a strike/exercise price of $5 expires in a month time. Just before the option expires, if the underlying stock rises from $4to $6, you should exercise your call option and buy the stock at $5 instead of current stock price, $6. You have profited $1 from this. However, nothing comes free, a certain premium fee is paid to purchase this option. So, if your premium is less than $1, you have made again. To get a better understanding of the difference between call options and warrants, click here.
6. BURSA, different stock markets
Here’s a list of active stock exchanges that you should take note of. They offer trading in securities and futures contracts.
Now, you should be filled with confidence when someone asks you “Have you heard of Deustche Bourse Stock Exchange?
Yeah I have!!
7. Futures & Forwards
A futures contract is simply known as ‘futures’. It’s a contractual agreement to buy or sell a particular financial instrument at a pre-determined price in the future. Sounds familiar to what you have read so far? No, it’s not the same as options/warrants. The key distinction is the fact that the future is an obligation, not a right. Even if the outcome goes against you financially, you’d still have to commit to what was pledged. The contract expresses the quantity and quality of the underlying asset and they are usually standardized to facilitate trading on the futures exchange.
Wrapping It Up
There you go! It’s been a productive day for you! Now, go out there and put that knowledge to good use.
