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Flashcards in Everything Deck (44)
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1

Capital Budgeting

the planning process used to determine whether an organization's long term investments such as new machinery, replacement of machinery, new plants, new products, and research development projects are worth the funding of cash through the firm's capitalization structure

2

Interest Only Loan

the borrower will pay the interest every period, but none of the principal will be repaid until the end of the loan

3

Coupon (Bonds)

The stated interest payment
made on a bond.

4

face value or par value

The principal amount of a
bond that is repaid at the
end of the term. Also called
par value .

5

coupon rate

The annual coupon divided
by the face value of a bond.

6

maturity

The specified date on
which the principal amount
of a bond is paid

7

yield to maturity

The interest rate required in the
market on a bond.

8

Interest Rate Risk: All other things being equal, the longer the time to maturity

the greater the interest
rate risk

9

All other things being equal, the lower the coupon rate

the greater the interest rate risk

10

indenture

The written agreement
between the corporation
and the lender detailing the
terms of the debt issue.
Secure bonds becuz there is collateral (car/house) given by browerer if he defaults

11

debenture

An unsecured debt, usually
with a maturity of 10 years
or more.

12

sinking fund

An account managed by
the bond trustee for early
bond redemption.

13

call provision

An agreement giving the
corporation the option
to repurchase a bond at
a specified price prior to
maturity.

14

call premium

Generally, the call price is above the bond’s stated value (that is, the par value). The difference
between the call price and the stated value is the call premium

15

Real interest rate

Interest rates or rates of
return that have been
adjusted for infl ation.

16

nominal rates

Interest rates or rates of
return that have not been
adjusted for infl ation.

17

Call options

https://www.youtube.com/watch?v=EfmTWu2yn5Q

18

Common Stock

right to vote for board of directors and get dividends; first people to buy shares if more are issued

19

Preferred stock

stocks that given owners the preference in how they get paid through dividends.
i. These stocks could be callable, meaning stockholder is required to sell their shares back to corporation
ii. Can be converted to common stock but not other way around
iii. Cumulative meaning if dividend is not paid it gets added up.

20

Bond

a corporate certificate indicating that an investor has lent money to a firm or govt

21

US govt bond

safe investment and so have low interest rate

22

Bull market

overall stock prices are going to rise

23

Bear market

when stock prices drop

24

Capital gains

the positive difference between the price at which you brought a stock and what you sell it for

25

Blue- chip stocks

Stocks issued by higher quality companies like Coca-cola, JJ, and IBM

26

Growth stocks

stocks of corp in emerging fields such as technology are expected to grow at a faster rate than other stocks

27

Income stocks

stocks of public utilities that offer high dividend yield

28

Penny Stocks

Ownership in companies that compete in high risk industries like oil companies

29

Beta

degree of stock’s risk

30

When central bank unexpectedly increases interest rates, the currency

strengthens