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exam 2 (bus 205)

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
Created by: devenmccormick



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