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27 Cards in this Set

  • Front
  • Back
capitalization rates
net of value appreciation or depriciation
market-extraction method
when cap rate is derived from market
band-of-investment method
individual rates of interest applicable to properties that use both debt and equity financing are weighted to arrive at market rate of capitalization
cash-on-cash return to equity investor
is knownas the equity dividend rate
Build up method:
-pure interest- interest that can be secured by government bonds
-rate of nonliquidity- rate necessary to compensate for negative inability to cash in the investment
-recapture premium- retun on investment or an adjustment for appriciation
-rate of risk
gross icnome multiplier (GIM)
relates total annual income to market value
steps in GIM
1) assertain gross annual market income
2) derive GIM from market
3) apply GIM to subject property
mezanine finance
financing generally provided in the form of subbordinated debt and equity kicker frequently in the context of LBO transaction
buyout
is a form of private equity transaction in which the nuyer acquires from the seller a controlling stake in the equity capital of a target company
exit routes
-IPO
-secondary market
-management buyout MBO
-liquidation
ratchet
mechanism that determines the allocation of equity between shareholders and the management team of the private equity controlled company
clawback provision
requires the GP to return capital to LPs in excess of the agreed profit split between the GP and LP
distribution waterfall
mechanism providing an order of distributions to LPs first before the GP receives carried interest
NAV
Value of fund's assts less liabilities corresponding to the accrued fund expenses
contango
if the future price of comodity is above the spot price
backvardation
if the future price of commodity is below the spot price
3 types of yeilds from commodities
1)collateral yeild
2) roll or convinies yeild
3) spot price return
collateral yeild
the return on cash used as margin to take long derivatives exposure
roll yeild
return from rolling forward the maturity of the derivatives position
geometric return of the average commodity
is close to zero but the geometric return of the commodity index is strong
core commodity investment approcaches
1) index fund
2) index-plus strategy
3) active long only strategy
one approximate method of estimating the expected return of a fixed income arbitrage fund is
to multiply the amount of credit spread by the amount of leverage
band of investment method
is the only method of capitalization rate determination that considers the financing mix used in real estate transaction
the market extraction method requires only two inputs
comparable property's sales price and "net operating income"
venture capital characteristics:
-primarily equity funded. use of leverage is rare or very limited
-returns of investment portfolios are generally characterized by very high returns from a limited number of highly successful investments and a significant number of write-offs
-venture capital firms monitor achievemtns of milestones defined in business paln and growth management
-expanding capital requirement if in the growth phase
-assessment of risk is difficult due to lack of history and new technology
buyouts characteristics
-extensive use of leverage
-returns on investments portfolios are generally characterized by lower variance across returns from underlying investments. bankruptcies are rare
-buyout firms monitor CF mgmt and startegic and business planing
-low WC requirements
-risk is measurable (long operating history)
ratchet
firm enabling management of private equity controlled company to be rewarded with increased equity ownership as a result of meeting performance targets