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20 Cards in this Set
- Front
- Back
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EAR
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Effective Annual Rate
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APR
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Annual Percentage Rate
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Term Structure
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The relationship between the investment term and the interest rate
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Yield Curve
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A plot of bond yields as a function of the bonds' maturity dates
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Risk Free Interest Rate
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The interest rate at which money can be borrowed or lent without risk over a given period.
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Nominal Interest Rate / Real Interest Rate
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The rate at which your money will grow if invested within a certain period. / the rate of growth of your purchasing power, after adjusting for inflation.
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Federal Funds Rate
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The overnight loan rate charged by banks with excess reserves at a Federal Reserve bank to banks that need funds to meet reserve requirements.
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Why are small changes in market interest rates good/bad for long-term loans?
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They can be either good or bad because with even just a single % change in market interest rates it dramatically changes the present value of the loan repayment.
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Treasury Bills
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U.S government bonds with a maturity of up to one year, also zero-coupon bonds
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Yield to Maturity
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The discount rate that sets the PV of the promised bond payments equal to the current market price of the bond.
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Credit risk
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The default risk of a bond; the bonds cash flows are not known with certainty
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Investment Grade Bonds
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Bonds that are within the top four categories that have a low default risk
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Speculative, junk, or high-yield bonds
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bonds that are within the bottom five categories because their default likelihood is high and therefore they promise high yields.
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Default Spread
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The difference between the yields of corporate bonds and the treasury yields.
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Straight voting
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each shareholder has as many votes for each director as shares held.
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Cumulative voting
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each shareholder's total value allocation for all directors is equal to the number of open spots multiplied by his/her number of shares.
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Proxy
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explicit instructions on how a shareholder's votes should be used.
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Market order
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An order for shares of a company, but with no specified price, just want it executed immediately at the most favorable price available.
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Limit order
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An order for shares of a company with a specific maximum price one is willing to pay, and one is willing to wait until it reaches said price to place the order.
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Floor broker
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a broker that holds a trading license at the NYSE and works to get the best execution possible for investors.
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