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47 Cards in this Set

  • Front
  • Back
A level stream of cash flows which continue forever (sometime called consols)
Perpetuity
A level stream of cash flows for a fixed period of time
Annuity
An annuity for which the cash flows occur at the start of the period
Annuity Due
This stated annual interest rate ignores the effect of compound interest within the year
Annual Percentage Rate
This interest rate does take into account the effect of compound interest
Effective Annual Rate
What is the difference between APR and EAR?
APR ignores compounding while EAR includes it
This type of loan requires the borrower to repay parts of the loan amount over time.
Amortized Loan
In this type of loan, borrower receives money today and repays a single lump sum in the future
Pure Discount Loan
In this type of loan, borrower pays interest each period and repays the entire principal at some point in the future
Interest-Only Loan
The stated interest payment made on a bond
Coupon
The principal amount of a bond that is repaid at the end of the term. Also called par value
Face Value
The annual coupon divided by the face value of a bond
Coupon Rate
Specific date on which the principal amount of a bond is repaid
Maturity
The rate required in the market on the bond
Yield to Maturity
Is the YTM quoted as an EAR or APR?
APR
If the CR=YTM, then the bond is selling at ____
Par
If the CR<YTM, then the bond is selling at _____
Discount
If the CR>YTM, then the bond is selling at _____
Premium
Bonds and interest rates have what type of relationship?
Inverse
Do bonds and stocks usually act the same or opposite?
Opposite
This measures the rate of return from interest payments on bonds
Current Yield
A bond that makes no coupon payments and is thus initially priced at a deep discount
Zero Coupon Bonds
The risk of change in the value of a bond because of a change in the interest rate
Interest Rate Risk
Are short term or long term more susceptible to interest rate risk?
Long Term
Are lower or higher coupon rates more susceptible to interest rate risk?
Lower coupon rates
When long-term rates > short-term rates, indicates inflation will rise or fall?
Rise
Lower-rated bonds tend to have higher or lower yields?
Higher
Interest rates adjusted for inflation
Real Rate
Interest rates not adjusted for inflation
Nominal Rate
Written agreement between the corporation and lender detailing terms of debt issue
Indenture
What are the two forms of a bond?
Registered and Bearer
Securities that are pledged as security for payment of debt
Collateral
An unsecured debt usually has a high coupon rate
Debenture
Indicates preference in position over other lenders
Seniority
An account managed by the bond trustee for early bond redemption; side savings account
Sinking Fund
Agreement giving the corporation the option to repurchase a bond at a specified price prior to maturity
Call Provision

*Usually when IR are low
Part of indenture limiting certain actions that might be taken during the term of the loan, usually to protect the lender's interest
Protective Covenants
What is rating begins the junk bond for Moody's?
Ba; B
What rating begins the junk bond for S&P?
BB; B
Rate at which the value of an investment grows
Capital Gains Yield
Procedure in which a shareholder may cast all votes for one member of the board of directors
Cumulative Voting
Procedure in which a shareholder may cast all votes for each member of the board of directors
Majority or Straight Voting
Do minority shareholders prefer cumulative or majority voting?
Cumulative
What entails a cumulative dividend?
If dividends are not paid in one year, they will be carried forward
What entails a cumulative dividend?
If dividends are not paid in one year, then the corporation does not have to make it up
An agent who buys and sells securities from inventory; "Bookstore"
Dealer
An agent who arranges security transactions among investors; "Real Estate Agent"
Broker