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Principles/ Finance
Definitions of finance terms
| Term | Meaning |
|---|---|
| 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. |
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