Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
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
|