Term
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Definition
| An annuity for which the cash flows occur at the beginning of each period. |
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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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Definition
| An annuity in which the cash flows continue forever. |
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Term
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Definition
| Another name for a perpetuity. |
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Term
| Effective Annual Rate(EAR) |
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Definition
| The effective interest rate, which takes into account the effect of compound interest. The interest rate expressed as if it were compouned once per year. |
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Term
| Annual Percentage Rate(APR) |
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Definition
| The nominal, stated annual interest rate that ignores the effect of compound interest within the year. The periodic rate(r) times the number of compoundings per year(m). |
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Term
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Definition
| Simpliest, pay a lump sum back in the future. |
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Term
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Definition
| Borrower pays interest each period and repays entire principal at some point. |
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Term
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Definition
| Where you make principle and interest payments each time period. |
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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. Also called par value. |
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Term
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Definition
| The annual coupon divided by the face value of a bond. |
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Term
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Definition
| 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. Also called the yield. |
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Definition
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Term
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Definition
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Term
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Definition
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Term
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Definition
| The risk of a change in the value of a bond because of a change in the interest rate. |
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Term
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Definition
| The relationship between interest rates and time-to-maturity of a debt security. |
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Term
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Definition
| The written agreement between the corporation and the lender detailing the terms of the debt issue. |
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Term
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Definition
| The corporation knows who has it.(name) |
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Term
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Definition
| Who ever has the bond owns it.(rare) |
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Term
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Definition
| The corporation has the bond backed up by property or some other possesion. |
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Term
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Definition
| Bond not backed up by anything.(more risk) |
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Term
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Definition
| These people get paid back first. |
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Term
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Definition
| Second in getting paid back.(more risk) |
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Term
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Definition
| A side savings account for a company. |
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Term
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Definition
| Company has ablility to make you sell back early. |
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Term
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Definition
| The difference between the call price and the stated value. |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| A bond that makes no coupon payments, and thus is initially priced at a deep discount. |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| NOT ownership of the firm, tax deductible, contracted cash flow. |
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Term
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Definition
| Not an ownership of the firm. |
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Term
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Definition
| Creditors do not have voting rights. |
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Term
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Definition
| Interest is considered a cost of doing business and is tax deductible. |
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Term
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Definition
| Creditors have legal recourse if interest or principal parments are missed. |
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Term
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Definition
| Excess debt can lead to financial distress and bankruptcy. |
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Term
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Definition
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Term
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Definition
| Common stockholders vote for the board of directors and other issues. |
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Term
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Definition
| Dividends are NOT considered a cost of doing business and are NOT tax deductible. |
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Term
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Definition
| Dividends are NOT a liability of the firm and stockholders have no legal recourse of dividends are not paid. |
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Term
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Definition
| An all equity firm can NOT go bankrupt. |
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Term
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Definition
| Government/State bonds that are exempt from federal tax. |
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Term
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Definition
| Can be exchanged/converted into stock |
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Term
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Definition
| The interest payments aren't garenteed, based on company's income. |
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Term
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Definition
| Consumer can make company buy bond back. |
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Term
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Definition
| 1. No growth or zero growth 2. Constant growth 3. Non-constant growth |
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Term
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Definition
| Dividends do not increase in dollar amount. |
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Term
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Definition
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Term
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Definition
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Term
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Definition
| Beginning Balance-principal |
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Term
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Definition
| Bond prices and market interest rates move in ___________ directions. |
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Term
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Definition
| All other things being equal, the __________ the time to maturity, the greater the interest rate risk. |
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Term
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Definition
| All other things being equal, the _________ the coupon rate, the greater the interest rate risk. |
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Term
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Definition
| When a bond's coupon rate is greater than the market's required return(YTM), the bond's market value(price) will be greater than its par value. |
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Term
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Definition
| When a bond's coupon rate is equal to the market's required return(YTM), the bond's market value(price) will be equal to its par value. |
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Term
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Definition
| When a bond's coupon rate is less than the market's required return(YTM), the bond's market value(price) will be less than its par value. |
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Term
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Definition
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Term
| Example of Govt. Bond Price |
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Definition
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Term
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Definition
| Find dividends until "g" is constant. |
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Term
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Definition
| Find the price the year before "g" is constant. |
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Term
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Definition
| Add that price to the dividend in that year. |
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Definition
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