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exam 2 (bus 205)
Term | Definition |
---|---|
Treasury Bills | when the us government needs to borrow funds, the us treasury issues short term securities... |
commercial paper | a short term debt instrument issued only by well known , credit worthy, firms that ks typically unsecured |
Negotiable certificates of Deposits | certificates issued by large commercial banks and other depository institutions as a short term source of funds |
repurchase agreement | one party sells securities to another with an agreement to repurchase the securities at a specified date and price |
federal funds rate | influenced by the supply of and demand for funds in the federal funds market |
banker's acceptance | indicates that a bank accepts responsibility for future payments |
bearer bonds | require the ownership to clip coupons attached to the bonds and send them to the issuer to receive coupon payments |
registered bonds | require the issuer to maintain records of who owns the bond and automatically send coupon payments to the owners |
yield to maturity | the annualized discount rate that equates the future coupon and principal payments to the initial proceeds received from the bond offering |
general obligation bonds | supported by the municipal government's ability to tax |
revenue bonds | must be generated by revenues of the project for which the bonds were issued |
corporate bonds | long term debt securities issued by corporations that promise the owner coupon payments on a semiannual basis |
sinking fund provisions | a requirement that the firm retire a certain amount of bond issue each year |
call provision | normally requires the firm to pay a price above par value when it calls its bonds |
mortgage | a form of debt created to finance investment in real estate |
prime mortgage | satisfy the traditional lending standards |
subprime mortgage | offered to borrowers who do not qualify for prime loans because they have relatively low income or high debt |
federally insured mortgage | guarantee loan repayment to the lending financial institution, thereby protecting it against the possible default of the borrower |
conventional mortgages | can be privately insured so that the lending financial institution can still avoid exposure to credit risk |
fixed rate mortgage | locks in the borrower's interest rate over the life of the mortgage |
amoritization schedule | can be developed to show the monthly payments broken down into principal and interest |
adjustable mortgage rate | allows the mortgage interest rate to adjust to market conditions |
graduated payment mortgage | allows borrower to make small payments initially on the mortgage; the payment increase on a graduated basis over the first 5 to 10 years and then level off |
growing equity mortgage | similar to the graduated payment mortgage in that the monthly payments are initially low and increase over time; however, payments never level off |
second mortgage | can be used in conjunction with the primary mortgage |
shared appreciation mortgage | allows a home purchaser to obtain a mortgage at a below market interest rate |
balloon payment mortgage | requires only interest payments for a three to five year period |
securitization | the pooling and repackaging of loans into securities called mortgage backed securities or pass through securities |
collateralized mortgage obligations | represent a type of mortgage backed securities in which the underlying mortgages are segmented into tranches, according to their maturity, and the cash flows provided by each tranche are typically structured in a sequential manner |
collateralized debt obligation | a package of debt securities backed by collateral that is sold to investors |