Best go look it up on Wikipedia, but here's a start:
Very very basically, a stock is a share in a business. If a company issues, say, 10000 shares, then each share entitles the holder to 1/10000 of the profit.
Bonds are just loans. Governments and corporations issue them to get ready-cash. The issuer pays interest to the bondholder, as an incentive.
Insurance companies deal in risk. Although certain events are very unlikely, they can be financially ruinous if they do occur. Insurance companies agree to pay out a certain amount in the event of such an occurence. They charge an annual premium, calculated by estimating the likely frequency of occurence of that event across their list of clients. So, if an event is likely to happen once a year across 1000 clients, and the cost of that event is likely to be £x, then each client would contribute £x/1000 as their annual premium, in addition to a nice slice of profit for the insurance company.
Banks lend money to businesses.
You could buy a financial newspaper, too. A bit heavy, but you'd get a feel for some of it.
02 Oct 2005, 9:04 am
