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PRESA, ERICA JASMIN R.

S (8:00-11:00AM)

Electronic commerce, commonly known as E-commerceor eCommerce, is trading in

products or services using computer networks, such as the Internet. Electronic commerce draws

on technologies such asmobile commerce,electronic funds transfer,supply chain

management,Internet marketing,online transaction processing,electronic data

interchange (EDI),inventory management systems,and automateddata collection systems.

Modern electronic commerce typically uses theWorld Wide Web for at least one part of the

transaction's life cycle, although it may also use other technologies such as e-mail.

E-commerce businesses usually employ some or all of the following practices:

ProvideEtail or virtual storefront on websites with online catalogs, sometimes gathered into a

"virtual mall"

Buy or sell on websites oronline marketplaces.

Gather and use demographic data through web contacts and social media.

Use electronic data interchange, the business-to-business exchange of data.

Reach prospective and established customers by e-mail or fax (for example, with newsletters).

Usebusiness-to-business buying and selling.

Provide secure business transactions

Online bankingis anelectronic payment system that enables customers of afinancial

institution to conductfinancial transactions on a website operated by the institution, such as a retail

bank, virtual bank, credit union or building society. Online banking is also referred as Internet

banking, e-banking, virtual bankingand by other terms.

To access a financial institution's online banking facility, a customer with Internet access would need to

register with the institution for the service, and set up some password (under various names) for

customer verification. The password for online banking is normally not the same as fortelephone

banking.Financial institutions now routinely allocate customers numbers (also under various names),

whether or not customers have indicated an intention to access their online banking facility. Customers'

numbers are normally not the same as account numbers, because a number of customer accounts can

be linked to the one customer number. The customer can link to the customer number any account

which the customer controls, which may be cheque, savings, loan, credit card and other accounts.

Customer numbers will also not be the same as any debit or credit card issued by the financial

institution to the customer.

To access online banking, a customer would go to the financial institution's secured website, and enterthe online banking facility using the customer number and password previously setup. Some financial

institutions have set up additional security steps for access to online banking, but there is no consistency

to the approach adopted.

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Systematic Risk-Systematic risk influences a large number of assets. A significant political

event, for example, could affect several of the assets in your portfolio. It is virtually impossible

to protect yourself against this type of risk.

Unsystematic Risk-Unsystematic risk is sometimes referred to as "specific risk". This kind of risk

affects a very small number of assets. An example is news that affects a specific stock such as a

sudden strike by employees.Diversification is the only way to protect yourself from

unsystematic risk. (We will discuss diversification later in this tutorial).

Now that we've determined the fundamental types of risk, let's look at more specific types of

risk, particularly when we talk aboutstocks andbonds.

Credit or Default Risk-Credit risk is the risk that a company or individual will be unable to pay

the contractual interest or principal on its debt obligations. This type of risk is of particular

concern to investors who hold bonds in their portfolios.Government bonds,especially those

issued by the federal government, have the least amount of default risk and the lowest returns,

whilecorporate bonds tend to have the highest amount of default risk but also higher interest

rates. Bonds with a lower chance of default are considered to beinvestment grade,while bondswith higher chances are considered to bejunk bonds.Bond rating services, such as Moody's,

allows investors to determine which bonds are investment-grade, and which bonds are junk. (To

read more, seeJunk Bonds: Everything You Need To Know,What Is A Corporate Credit

RatingandCorporate Bonds: An Introduction To Credit Risk.)

Country Risk-Country risk refers to the risk that a country won't be able to honor its financial

commitments. When a countrydefaults on its obligations, this can harm the performance of all

other financial instruments in that country as well as other countries it has relations with.

Country risk applies to stocks, bonds, mutual funds, options and futures that are issued within a

particular country. This type of risk is most often seen inemerging markets or countries that

have a severe deficit. (For related reading, seeWhat Is An Emerging Market Economy?)

Foreign-Exchange Risk- When investing in foreign countries you must consider the fact that

currency exchange rates can change the price of the asset as well.Foreign-exchange risk applies

to all financial instruments that are in a currency other than your domestic currency. As an

example, if you are a resident of America and invest in some Canadian stock in Canadian dollars,

even if the share value appreciates, you may lose money if the Canadian dollar depreciates in

relation to the American dollar.

Interest Rate Risk-Interest rate risk is the risk that an investment's value will change as a result

of a change in interest rates. This risk affects the value of bonds more directly than stocks. (To

learn more, readHow Interest Rates Affect The Stock Market.)

Political Risk-Political risk represents the financial risk that a country's government will

suddenly change its policies. This is a major reason why developing countries lack foreign

investment.

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Market Risk- This is the most familiar of all risks. Also referred to asvolatility,market risk is the

the day-to-day fluctuations in a stock's price. Market risk applies mainly to stocks and options.

As a whole, stocks tend to perform well during a bull market and poorly during a bear market -

volatility is not so much a cause but an effect of certain market forces. Volatility is a measure of

risk because it refers to the behavior, or "temperament", of your investment rather than the

reason for this behavior. Because market movement is the reason why people can make money

from stocks, volatility is essential for returns, and the more unstable the investment the more

chance there is that it will experience a dramatic change in either direction

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