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Principles/ Finance

Definitions of finance terms

TermMeaning
Bonds A long-term debt instrument
Certificate of deposit Interest-earning time deposit at bank or other financial intermediary
Money market mutual fund Pools of funds managed by investment co. that are primarily invested in short term assets
Par Value The normal or face value of a stock or bond
Federal funds Overnight loans from one bank to another
T-Bills Discounted debt instruments issued by the govt.
Discounted securities Securities selling for less than par value.
Common equity The sum of the firms common stock paid in capital and retained earnings.
Negotiable CD CD that can be traded to other investors prior to maturity
Bonds A long-term debt instrument
Certificate of deposit Interest-earning time deposit at bank or other financial intermediary
Money market mutual fund Pools of funds managed by investment co. that are primarily invested in short term assets
Par Value The normal or face value of a stock or bond
Federal funds Overnight loans from one bank to another
T-Bills Discounted debt instruments issued by the govt.
Discounted securities Securities selling for less than par value.
Common equity The sum of the firms common stock paid in capital and retained earnings which equals the common stockholders total investment in the firm stated at book value.
Negotiable CD CD that can be traded to other investors prior to maturity
Additional paid in capital The difference between the value of newly issued stock and its par value.
Call option An option to buy shares of stock at a certain price within a specified period of time.
Call provision a provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date.
Additional paid in capital The difference between the value of newly issued stock and its par value.
Call option An option to buy shares of stock at a certain price within a specified period of time.
Call provision a provision in a bond contract that gives the issuer the right to redeem the bonds under specified terms prior to the normal maturity date.
Commercial paper a discounted instrument that is a type of promisory note, or legal IOU, issued by large, financially sound firm.
Convertible security A security, usually a bond or preferred stock, that is exchangable at the option of the holder for the common stock of the issuing firm.
Debenture A long term bond that is not secured by a mortgage on specific property
Financial asset An asset that reprresents a promise to distribute cash flows at some time in the future.
Floating rate bond A bond whose interest rate fluctuates with shifts in the general level of interest rates.
Growth stocks Stocks that generally pay little or no dividends so as to retain earnings to help fund growth opportunities.
Indenture A formal agreement or contract between the issuer of a bond and the bond holders.
Investment grade bond A bond rated A or tripple-B; many banks and other institutional investors are permitted by law to hold only bonds rated investment grade or better.
Junk bond A high-risk, high-yield bond used for finance mergers, leveraged buyouts, and troubled companies.
Mortgage bond A bond backed by fixed assets. First mortgage bonds are senior in priority to claims of second mortgage bonds.
Municipal bonds A bond issued by state or local governments.
Proxy A document giving the authority for one person to act for another, typically the power to vote shares of common stock.
Put option A option to sell shares of stock at specified price during a particular time period.
Real asset A physically obsevable or touchable item
Restrictive covenant A provision in a debt contract that constrains the actions of the borrower.
Sinking fund A required annual payment designed to amoritize a bond or preferred stock issue.
Striking (exercise) price The price that must be paid(buying or selling) for a sharer of common stock when an potion is exercised.
Subordinated debenture A bond that has a claim on assets only after the senior debt has been paid off in the event of liquidation.
Term loan A loan generally obtained from a bank or insurance company, on which the borrower agrees to make a series of payments consisting of interest and principal.
Created by: $amoney on 2006-09-14



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