Term
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Definition
| One one-hundredth of a percentage point |
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Term
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Definition
| Cash payments to the holder of a security |
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Term
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Definition
| A perpetual bond w/no maturity date and no repayment of principal that periodically makes fixed coupon payments |
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Term
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Definition
| A credit market instrument that pays the owner a fixed interest payment every year until the maturity date, when a specified final amount is repaid |
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Term
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Definition
| The dollar amount of the yearly coupon payment expressed as a percentage of the face value of a coupon bond |
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Term
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Definition
| An approximation of the yield to maturity that equals the yearly coupon payment divided by the price of the bond |
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Term
| Discount Bond (Zero-Coupon Bond) |
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Definition
| A credit market instrument that is bought at a price below its face value, which is paid at maturity date; does not make any interest payments |
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Term
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Definition
| A specified final amount paid to the owner of a coupon bond at maturity date |
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Term
| Fixed-Payment Loan (fully amortized) |
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Definition
| A credit market instrument that provides borrower with an amount of money that’s repaid by making a fixed payment periodically for a set number of years. |
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Term
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Definition
| A bond whose interest and principal payments are adjusted for changes in the price level, and whose interest rate thus provides a direct measure of a real interest rate |
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Term
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Definition
| The possible reduction in returns associated with changes in interest rates |
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Term
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Definition
| An interest rate that does not take inflation into account |
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Term
| Present (Discounted) Value |
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Definition
| Today’s value of a payment to be received in the future when the interest rate is i |
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Term
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Definition
| The change in a security’s price relative to the initial purchase price |
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Term
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Definition
| The interest rate adjusted for expected changes in the price level (inflation) so that it more accurately reflects the true cost of borrowing |
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Term
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Definition
| Terms reflecting actual goods and services one can buy |
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Term
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Definition
| The payments to the owner of a security plus the change in the security’s value, expressed as a fraction of its purchase price |
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Term
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Definition
| A credit market instrument providing the borrower with an amount of funds that must be repaid to the lender at the maturity date along with an additional payment (interest) |
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Term
| Yield on a Discount Basis (discount yield) |
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Definition
| The measure of interest rates by which dealers in bill markets quote the interest rate on US Treasury bills |
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Term
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Definition
| The interest rate that equates the present value of payments received from a credit market instrument with its value today |
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Term
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Definition
| An approach to determine asset prices using stocks of assets rather than flows |
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Term
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Definition
| The return on an asset expected over the next period |
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Term
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Definition
| The outcome that when expected inflation occurs, interest rates will rise |
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Term
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Definition
| The relative ease and speed with which an asset can be converted into cash |
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Term
| Liquidity Preference Framework |
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Definition
| A model developed by Keynes that predicts the equilibrium interest rate on the basis of the supply of and demand for money |
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Term
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Definition
| A situation occurring when the quantity that people are willing to buy (demand) equals the quantity that people are willing to sell (supply) |
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Term
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Definition
| The amount of interest (expected return) sacrificed by not holding an alternative asset |
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Term
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Definition
| The degree of uncertainty associated with the return on an asset |
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Term
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Definition
| All resources owned by an individual, including all assets |
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Term
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Definition
| The acquisition of assets that have a lo rate of default and diversification of asset holdings to increase profits |
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Term
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Definition
| A list of assets and liabilities of a bank/firm that balances: total assets equal total liabilities plus capital |
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Term
| Capital Adequacy Management |
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Definition
| A bank’s decision about the amount of capital it should maintain and then acquisition of the needed capital |
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Term
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Definition
| A required minimum amount of funds that a firm receiving a loan must keep in a checking account at the lending bank |
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Term
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Definition
| A lender’s refusal to make loans even though borrowers are willing to pay the stated interest rate or even a higher rate; or restriction of the size of loans made to less than the full amount sought. |
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Term
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Definition
| The risk arising from the possibility that the borrower will default |
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Term
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Definition
| Losses of deposits when depositors make withdrawals or demand payment |
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Term
| Discount Loans (advances) |
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Definition
| A bank’s borrowings from the Fed |
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Term
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Definition
| The interest rate that the Fed charges banks on discount loans |
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Term
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Definition
| A measurement of the sensitivity of the market value of a bank’s assets and liabilities to changes in interest rates. |
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Term
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Definition
| The amount of assets per dollar of equity capital |
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Term
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Definition
| Reserves in excess of required reserves |
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Term
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Definition
| A measurement of the sensitivity of bank profits to changes in interest rates, calculated by subtracting the amount of rate-sensitive liabilities from the amount of rate-sensitive assets |
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Term
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Definition
| The possible reduction in returns associated with changes in interest rates |
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Term
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Definition
| The acquisition of funds at low cost to increase profits |
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Term
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Definition
| The decisions made by a bank to maintain sufficient liquid assets to meet the bank’s obligations to depositors |
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Term
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Definition
| A bank’s commitment (for a specified future period of time) to provide a firm with loans up to a given amount at an interest rate that is tied to some market interest rate |
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Term
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Definition
| The sale under a contract (aka secondary loan participation) of all or part of the cash stream from a specific loan, thereby removing the loan from the bank’s balance sheet |
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Term
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Definition
| Large banks in key financial centers |
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Term
| Off-Balance-Sheet Activities |
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Definition
| Bank activities that involve trading financial instruments and the generation of income from fees and loan sales, all of which affect bank profits but are not visible on bank balance sheets |
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Term
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Definition
| The fraction of deposits that the Fed requires to be kept as reserves |
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Term
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Definition
| Reserves that are held to meet the Fed’s requirement that for every dollar of deposits at a bank, a certain fraction must be kept as reserves |
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Term
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Definition
| Regulation making it obligatory for depository institutions to keep a certain fraction of their deposits in accounts with the Fed |
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Term
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Definition
| Bank’s holding of deposits in accounts with the Fed plus currency that is physically held by banks (vault cash) |
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Term
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Definition
| Net profit after taxes per dollar of assets |
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Term
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Definition
| Net profit after taxes per dollar of equity capital |
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Term
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Definition
| Short-term US government and agency securities held by banks |
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Term
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Definition
| A simplified balance sheet with lines in the for of a T that lists only the changes that occur in balance sheet items starting from some initial balance sheet position |
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Term
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Definition
| Currency that is physically held by banks and stored in vaults overnight |
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