Term
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Definition
The process of planning and managing a firm's long-term investments.
Size, timing, and risk of cash flows |
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Term
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Definition
| The mixture of debt and equity maintained by a firm. |
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Term
| Working Capital Management |
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Definition
| A firm's short term assets and liabilities. |
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Term
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Definition
Business owned by one person
Simplest to start, least regulated
Keep all profits
Unlimited liability
Life limited to owner's life span
Limited equity to personal wealth |
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Term
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Definition
A business formed by two or more individuals or entities
Share in gains/losses
Unlimited liability
Easy to form
Income is taxed as personal |
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Term
| Goal of Financial Management |
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Definition
| the goal of financial management is to maximize the current value per share of the existing stock |
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Term
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Definition
| The possibility of conflict of interest between the stockholders and management of a firm |
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Term
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Definition
| Someone other than a stockholder or creditor who potentially has a claim on the cash flows of the firm |
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Term
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Definition
| The process of accumulating interest on an investment over time to earn more interset |
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Term
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Definition
| Interest earned on the reinvestment of previous interest payments |
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Term
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Definition
| Interest earned on both the initial principal and the interest reinvested from prior periods |
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Term
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Definition
| Interest earned only on the original principal amount invested |
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Term
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Definition
| The rate used to calculate the present value of future cash flows |
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Term
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Definition
| A level stream of cash flows for a fixed period of time |
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Term
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Definition
An annuity in which the cash flows continue forever
PV perpetuity= C/r |
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Term
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Definition
| The interest rate expressed in terms of the interest payment made each period (quoted rate) |
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Term
| Effective Annual Rate (EAR) |
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Definition
The interest rate expressed as if it were compounded once a year. ALWAYS CONVERT TO EAR to compare different investments.
EAR= [1+ (Quoted rate/m)]^m-1 |
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Term
| Annual Percentage Rate (APR) |
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Definition
| The interest rate charged per period multiplied by the number of periods per year. |
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Term
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Definition
| The state interest payment made on a bond |
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Term
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Definition
| The stated interest payment made on a bond |
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Term
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Definition
| The principal amount of a bond that is repaid at the end of the term. |
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Term
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Definition
| The annual coupon divided by the face value of the bond |
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Term
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Definition
| The specified date on which the principal amount of a bond is paid |
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Term
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Definition
| The rate required in the market on a bond |
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Term
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Definition
| Present value of the coupons + Present value of the face amount |
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Term
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Definition
Interest rates rise, bond value goes down
Longer Maturity, greater the interest rate risk
Lower the coupon, the greater the interest rate risk |
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Term
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Definition
| A bond's annual coupon divided by its price |
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Term
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Definition
| An agreement giving the corporation the option to repurchase a bond at a specified price prior to maturity |
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Term
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Definition
| The amount by which the call price exceeds the par value of a bond |
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Term
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Definition
A bond that makes no coupon payments and is thus initially priced at a deep discount
PF Face = F/(1+r)^t |
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Term
| Higher rating lowest yield |
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Definition
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Term
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Definition
| 3 party contract between issuer... |
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Term
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Definition
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Term
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Definition
| coupon < current yield = discount |
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Term
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Definition
| (1+R)=(1+r)(1+n) The relationship between nominal returns, real returns, and inflation |
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Term
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Definition
| Relationship between maturity and yield |
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