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33 Cards in this Set
- Front
- Back
coupon
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state interest payment made on a bond
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face value
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the principal amount of a bond that is repaid at the end of the term (par value )
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coupon rate
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the annual coupon divided by the face value of the bond
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maturity
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date on which the principal amount of a bond is paid
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yield to maturity (YTM)
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the rate required in the market on a bond
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current yield
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a bonds annual coupon divided by its price
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indenture
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the written agreement between the corporation and the lender detailing the terms of the debt issue
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registered form
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the form of bond issue in which the registrar of the company records ownership of each bond; payment is made directly to the owner of record
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bearer form
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the form of bond issue in which the bond is issued without record of the owner's name; payment is made to whomever holds the bond
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debenture
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an unsecured debt usually with a maturity of 10 years or more
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note
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an unsecured debt, usually with a maturity under 10 years
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sinking fund
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an account managed by the bond trustee for early bond redemption
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call provision
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an agreement giving the corporation the option to repurchase the bond at a specific price prior to maturity
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call premium
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the amount by which the call price exceeds the par value of the bond
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deferred call provision
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a call provision prohibiting the company from redeeming the bond prior to a certain date
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call protected bond
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a bond that currently cannot be redeemed by the issuer
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protective covenant
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a part of the indenture limiting certain actions that might be taken during the term of the loan, usually to protect the lender
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zero coupon bond
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a bond that makes no coupon payments, and thus is initially priced at a deep discount
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bid price
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the price a dealer is willing to pay for a security
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asked price
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the price a dealer is willing to take for a security
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bid-ask spread
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the difference between the bid price and the asked price
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clean price
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the price of a bond net of accrued interest; this is the price that is typically quoted
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dirty price
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the price of a bond including accrued interest also known as the full or invoice price. this is the price the buyer actually pays
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real rates
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interest rates or rates of return that have been adjusted for inflation
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nominal rates
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interest rates or rates of return that have not been adjusted for inflation
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fischer effect
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the relationship between nominal returns, real returns, and inflation
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term structure of interest rates
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the relationship between nominal interest rates on default- free pure discount securities and time to maturity; that is the pure time value of money
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inflation premium
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the portion of a nominal interest rate that represents compensation for expected future inflation
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interest rate risk premium
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the compensation investors demand for bearing interest rate risk
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treasury yield curve
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a plot of the yields on Treasury notes and bonds relative to maturity
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default risk premium
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the portion of a nominal interest rate or bond yield that represents compensation for the possibility of default
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taxability premium
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the portion of a nominal interest rate or bond yield that represents compensation for unfavorable tax status
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liquidity premium
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the portion of a nominal interest rate or bond yield that represents compensation for lack of liquidity
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