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