Finance Ch. 6 Vocab
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each of the black spaces below before clicking
on it to display the answer.
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| Debt | A loan to a firm, government, or individual.
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| Discounted Securities | Securities selling for less than par value.
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| Treasury Bills (T-bills) | Discounted debt instruments issued by the U.S. government.
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| Repurchase Agreement | An arrangement where one firm sells some of its financial assets to another firm with a promise to repurchase the securities at a later date.
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| Federal Funds | Overnight loans from one bank to another.
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| Banker's Acceptance | An instrument issued by a bank that obligates the bank to pay a specified amount at some future date.
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| Commercial Paper | A discounted instrument that is a type of promissory note, or "legal" IOU, issued by large, finically sound firms.
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| Certificate of Deposit | An interest-earning time deposit at a bank or other financial intermediary.
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| Eurodollar Deposit | A deposit in a foreign bank that is denominated in U.S. dollars.
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| Money Market Mutual Funds | Pools of funds managed by investment companies that are primarily invested in short-term financial assets.
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| 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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| Bond | A long-term debt instrument.
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| Coupon Rate | Interest paid on a bond or other debt instrument stated as a percentage of it face (maturity) value.
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| Government Bonds | Debt issued by federal, state, or local governments.
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| Municipal Bonds | Bonds issued by state or local governments.
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| Corporate Bonds | Long-term debt instruments issued by corporations.
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| Mortgage Bond | A bond backed by fixed assets. First-mortgage bonds are senior in priority to claims of second-mortgage bonds.
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| Debenture | A long-term bond that is not secured by a mortgage on specific property.
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| Subordinated Debenture | A bond which, in the event of liquidation, has a claim on assets only after the senior debt has been paid off.
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| Income Bond | A bond that pays interest to the holder only if the interest is earned by the firm,
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| Putable Bond | A bond that van be redeemed at the bondholder's option when certain circumstances exist.
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| Indexed (purchasing-power) Bond | A bond that has interest payments based on an inflation index to protect the holder from loss of purchasing power.
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| Floating-rate Bond | A bond whose interest rate fluctuates with shifts in the general level of interest rates.
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| Zero Coupon Bond | A bond that pays no annual interest but is sold at a discount below par, thus providing compensation to investors in the form of capital appreciation.
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| Indenture | A formal agreement (contract) between the issuer of a bond and the bondholders.
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| Call Provision | A provision in a bond contract that gives issuers the right to redeem the bonds under specified terms prior to the normal maturity date.
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| Sinking Fund | A required annual payment designed to amortize a bond issue.
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| Conversion Feature | Permits bondholders to exchange their investments for a fixed number of shares of common stock.
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| Foreign Debt | Debt sold by a foreign borrower but denominated in the currency of the of the country where it is sold.
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| Eurodebt | Debt sold in a country other than the one in whose currency the debt is denominated.
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| LIBOR | The London Interbank Offered Rate, the interest rate offered by the best London banks on deposits of other large, very creditworthy banks.
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| Yield to Maturity (YTM) | The average rate of return earned on a bond if it is held to maturity.
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| Yield to Call (YTC) | The average rate of return earned on a bond if it is held until the first call date.
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| Current (interest) Yield | The interest payment divided by the market price of the bond.
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| Capital Gains Yield | The percentage change in the market price of a bond over some period of time.
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| Interest Rate Price Risk | The risk of changes in bond prices to which investors are exposed as the result of changing interest rates.
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| Interest Rate Reinvestment Risk | The risk that income from a bond portfolio will vary because cash flow must be reinvested at current market rates.
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