Glossary From Mayo Investment Textbook

Front 1

regressive tax

Back 1

a tax whose rate declines as the tax base increases

Front 2

regular dividends

Back 2

steady dividend payments that are distributed at regular intervals

Front 3

reinvestment rate risk

Back 3

the risk associated with reinvesting earnings or principal at a lower rate than was initially earned

Front 4

renegotiable-rate mortgage loan

Back 4

a mortgage loan in which the parties have the option to renegotiate the interest rate charged on the loan

Front 5

risk

Back 5

the possibility of a loss;
the uncertainty of future returns

Front 6

round lot

Back 6

the general unit of trading in a security, such as 100 shares

Front 7

right

Back 7

an option given to stockholders to buy additional shares at a specified price during a specified time period before the offer is made to the general public

Front 8

rights offering

Back 8

sale of new securities to stockholders

Front 9

revaluation

Back 9

an increase in the value of one currency relative to other currencies

Front 10

revenue bond

Back 10

a bond whose interest is paid only if the debtor earns sufficient revenue

Front 11

revaluation

Back 11

an increase in the value of one currency relative to other currencies

Front 12

revenue bond

Back 12

a bond whose interest is paid only if the debtor earns sufficient revenue

Front 13

return

Back 13

the sum of income plus capital gains earned on an investment in an asset.

INCOME + CAP. GAINS = ?

Front 14

return on assets

Back 14

the ratio of earnings to total assets

earnings / total assets = ROA

Front 15

return on equity

Back 15

the ratio of earnings to equity

earnings / equity = ?

Front 16

quick ratio (acid test)

Back 16

current assets excluding inventory divided by current liabilities;

a measure of liquidity

Front 17

rate of return

Back 17

the annual percentage return realized on an investment

Front 18

rate of return (internal rate of return, or IRR)

Back 18

the discount rate that equates the cost of an investment with the cash flows generated by the investment

Front 19

real estate investment trust (REIT)

Back 19

closed-end investment company that specializes in real estate or mortgage investments

Front 20

repurchase agreement (repo)

Back 20

sale of short-term security in which the seller agrees to buy back the security at a specified price

Front 21

required return

Back 21

the return necessary to induce the investor to purchase an asset

Front 22

reserve requirement

Back 22

the percentage of cash that banks must hold against their deposit liabilities

Front 23

reset bond

Back 23

bond whose coupon is periodically reset

Front 24

retention ratio

Back 24

the ratio of earnings not distributed to earnings

Front 25

realized return

Back 25

the sum of income and capital gains earned on an investment

Front 26

realized returns

Back 26

the sum of income and capital gains earned on an investment

Front 27

recapitalization

Back 27

an alteration in a firm's source of finance, such as the substitution of long-term debt for equity

Front 28

receivables turnover

Back 28

the speed with which a firm collects its accounts receivable

Front 29

recession

Back 29

a period of rising unemployment and declining national output

Front 30

refunding

Back 30

the act of issuing new debt and using the proceeds to retire existing debt

Front 31

registered representative

Back 31

a person who buys and sells securities for customers;

a broker.

Front 32

registration

Back 32

process of filing information with the SEC concerning a proposed sale of securities to the general public.

Front 33

regional funds

Back 33

mutual funds that specialize in a particular geographic area.

Front 34

registered bond

Back 34

a bond whose ownership is registered with the commercial bank that distributes interest payments and principal repayments.

Front 35

private placement

Back 35

the non-public sale of securities.

Front 36

pro forma financial statement

Back 36

a projected or forecasted financial statement.

Front 37

programmed trading

Back 37

coordinated buying or selling of portfolios triggered by computers.

Front 38

progressive tax

Back 38

a tax whose rate remains constant as the tax base changes.

Front 39

property tax

Back 39

a tax levied against the value of real or financial assets.

Front 40

present value

Back 40

the current worth of an amount to be received in the future.

Front 41

present value of an annuity

Back 41

the present worth of a series of equal payments.

Front 42

primary market

Back 42

the initial sale of securities.

Front 43

principal

Back 43

the amount owed;

the face value of a debt.

Front 44

preliminary prospectus
(red herring)

Back 44

initial document detailing the financial condition of a firm that must be filed with the SEC to register a new issue of securities.

Front 45

premium

Back 45

the market price of an option.

Front 46

premium (of a bond)

Back 46

the extent to which a bond's price exceeds the face amount of the debt.

Front 47

premium (over net asset value)

Back 47

the extent to which the price of a closed-end investment company's stock exceeds the share's net asset value.

Front 48

proportionate tax

Back 48

a tax whose rate remains constant as the tax base changes.

Front 49

purchasing power risk

Back 49

the uncertaintly that future inflation will erode the purchasing power of assets and income.

Front 50

put bond

Back 50

a bond that the holder may redeem (i.e., sell back to the issuer) at a specified price and a specified time.

Front 51

put option

Back 51

an option to sell stock at a specified price within a specified time period.

Front 52

secondary market

Back 52

a market for buying and selling previously issued securities.

Front 53

Securities and Exchange Commission (SEC)

Back 53

government agency that enforces the federal securities laws.

Front 54

Securities Investor Protection Corporation (SIPC)

Back 54

the agency that insures investors against failures by brokerage firms.

Front 55

securitization

Back 55

the process of converting an illiquid asset into a marketable security.

Front 56

semiannual compounding

Back 56

the payment of interest twice a year.

Front 57

semiannual compounding

Back 57

the payment of interest twice a year.

Front 58

serial bond

Back 58

a bond issue in which specified bonds mature each year.

Front 59

series EE (Patriot) bonds

Back 59

savings bonds issued in small denominations by the federal government.

Front 60

share averaging

Back 60

a system for the accumulation of shares in which the investor periodically buys the same number of shares.

Front 61

Sharpe performance index

Back 61

a risk-adjusted measure of performance that standardizes the return in excess of the risk-free rate by the standard deviation of the portfolio's return.

Front 62

short position

Back 62

selling borrowed assets for possible price deterioration;

being short in a security or a commodity.

Front 63

short sale

Back 63

the sale of borrowed securities in anticipation of a price decline;

a contract for future delivery.

Front 64

sinking fund

Back 64

a series of periodic payments to retire a bond issue.

Front 65

specialist

Back 65

a market maker on the New York Stock Exchange who maintains an orderly market in the security.

Front 66

speculation

Back 66

an investment that offers a potentially large return but is also very risky;

a reasonable probability that the investstment will produce a loss.

Front 67

split coupon bond

Back 67

bond with a zero or low initial coupon followed by a period with a high coupon.

Front 68

spot price

Back 68

the current price of a commodity.

Front 69

spread

Back 69

the difference between the bid and the ask prices.

Front 70

Standard & Poor's 500 stock index

Back 70

a value-weighted index of 500 stocks.

Front 71

statement of cash flows

Back 71

an accounting statement that enumerates a firm's cash inflows and cash outflows.

Front 72

stock

Back 72

a security representing ownership in a corporation.

Front 73

stock dividend

Back 73

a dividend paid in stock.

Front 74

stock index futures

Back 74

a contract based on an index of security prices.

Front 75

stock index options

Back 75

rights to buy and sell based on an aggregate measure of stock prices.

Front 76

stock repurchase

Back 76

the buying of stock by the issuing corporation.

Front 77

stock split

Back 77

recapitalization that affects the number of shares outstanding, their par value, the earnings per share, and the price of the stock.

Front 78

stop order

Back 78

a purchase or sell order designed to limit an investor's loss or to assure a profit on a position in a security.

Front 79

straight-line depreciation

Back 79

the allocation of the cost of plant and equipment by equal annual amounts over a period of time.

Front 80

street name

Back 80

the registration of securities in a brokerage firm's name instead of in the buyer's name.

Front 81

surplus

Back 81

receipts exceeding disbursements.

Front 82

swap

Back 82

an agreement to exchange payments.

Front 83

syndicate

Back 83

a selling group assembled to market an issue of securities.

Front 84

systematic risk

Back 84

risk from fluctuations in security prices; (e.g., market risk).

Front 85

tax anticipation note

Back 85

short-term government security secured by expected tax revenues.

Front 86

tax-deferred annuity

Back 86

a contract sold by an insurance company in which the company guarantees a series of payments and whose earnings are not taxed until they are distributed.

Front 87

tax-exempt bond

Back 87

a bond whose interest is excluded from federal income taxation.

Front 88

tax shelter

Back 88

an asset or investment that defers, reduces, or avoids taxation.

Front 89

technical analysis

Back 89

an analysis of past volume and/or price behavior to identify which assets to purchase or sell and the best time to purchase or sell them.

Front 90

10-K report

Back 90

a required annual report filed with the SEC by publicly held firms.

Front 91

10-Q report

Back 91

a required quarterly report filed with the SEC by publicly held firms.

Front 92

term insurance

Back 92

life insurance with coverage for a specified time and excluding a savings plan.

Front 93

third market

Back 93

over-the-counter market for securities listed on an exchange.

Front 94

time premium

Back 94

the amount by which an option's price exceeds the option's intrinsic value.

Front 95

time-series analysis

Back 95

an analysis of a firm over a period of time.

Front 96

time-weighted rate of return

Back 96

average of individual holding period returns.

Front 97

times-dividend-earned ratio

Back 97

earnings divided by preferred dividend requirements.

Front 98

times-interest-earned ratio

Back 98

ratio of earnings before interest and taxes divided by interest expense;

a coverage ratio that measures the safety of debt.

Front 99

13-D report

Back 99

document filed with the SEC by an individual who acquires 5 percent of a publicly held firm's stock.

Front 100

total return

Back 100

the sum of dividend yield and capital gains.

Front 101

trader

Back 101

an investor who frequently buys and sells.

Front 102

tranche

Back 102

subdivision of a bond issue.

Front 103

Treasury bills

Back 103

short-term federal government securities

Front 104

Treasury bonds

Back 104

the long-term debt of the federal government

Front 105

Treasury notes

Back 105

the intermediate-term debt of the federal government.

Front 106

Treynor index

Back 106

a risk-adjusted measure of performance that standardizes the return in excess of the rik-free rate by the portfolio's systematic risk.

Front 107

trustee

Back 107

an appointee, usually a commercial bnak, responsible for upholding the terms of a bond's indenture.

Front 108

12b-1 fees

Back 108

fees that a mutual fund may charge to cover marketing and advertising expenses.

Front 109

two-step mortgage loan

Back 109

a mortgage loan in which the interest rate is changed once at a predetermined time.

Front 110

undercapitalized

Back 110

having insufficient equity financing.

Front 111

underwriting

Back 111

the process by which securities are sold to the general public and in which the investment banker buys the securities from the issuing firm.

Front 112

unimproved land

Back 112

land that has not been cleared and that lacks improvements, such as curbs and gutters.

Front 113

unit trust

Back 113

a passive investment company with a fixed portfolio of assets that are self-liquidating.

Front 114

unsystematic risk

Back 114

the risk associated with individual events that affect a particular security.

Front 115

U.S. Treasury bill

Back 115

short-term debt of the federal government.

Front 116

valuation

Back 116

the process of determining the current worth of an asset.

Front 117

value

Back 117

what something is worth;

the present value of future benefits.

Front 118

variable interest rate bonds

Back 118

a long-term bond with a coupon rate that varies with changes in short-term rates.

Front 119

venture capitalist

Back 119

firm specializing in investing in the securities, especially stock, of small, emerging companies.

Front 120

Veterans Administration (VA)

Back 120

an agency of the federal government that will guarantee mortgages granted to qualified veterans.

Front 121

voting rights

Back 121

the rights of stockholders to vote their shares.

Front 122

warrant

Back 122

an option issued by a company to buy its stock at a specified price within a specified time period.

Front 123

yield curve

Back 123

the relationship between time to maturity and yields for debt in a given risk class.

Front 124

yield to call

Back 124

the yield earned on a bond from the time it is acquired until the time it is called and retired by the firm.

Front 125

yield to maturity

Back 125

the yield earned on a bond from the time it is acquired until the maturity date.

Front 126

zero coupon bond

Back 126

a bond on which interest accrues and is paid at maturity, and is intially sold at a discount.