G-4

Question 1

Bond equivalent yield

Answer 1

A calculation of yield that is annualized using the ratio of 365 to the number of days to maturity;

Allows for the restatement and comparison of securities with different compounding periods.

Question 2

Bond indenture

Answer 2

The governing legal credit agreement, typically incorporated by reference in the prospectus;

Also called trust deed

Question 3

Bond market vigilantes

Answer 3

Bond market participants who might reduce their demand for long-term bonds, thus pushing up their yields

Question 4

Bond yield plus risk premium approach

Answer 4

An estimate of the cost of common equity that is produced by summing the before-tax cost of debt and a risk premium that captures the additional yield on a company’s stock relative to its bonds;

The additional yield is often estimated using historical spreads between bond yields and stock yields

Question 5

Bonus issue of shares

Answer 5

A type of dividend in which a company distributes additional shares of its common stock to shareholders instead of cash

Question 6

Book building

Answer 6

Investment bankers’ process of compiling a “book” or list of indications of interest to buy part of an offering

Question 7

Book value

Answer 7

The net amount shown for an asset or liability on the balance sheets;

May also refer to the company’s excess of total assets over total liabilities;

Also called carrying value

Question 8

Boom

Answer 8

An expansionary phase characterized by economic growth “testing the limits” of the economy

Question 9

Bottom-up analysts

Answer 9

An investment selection approach that focuses on company-specific circumstances rather than emphasizing economic cycles or industry analysts

Question 10

Break point

Answer 10

In the context of the weighted average cost of capital (WACC), this is the amount of capital changes, leading to a change in the WACC

Question 11

Breakeven point

Answer 11

The number of units produced and sold at which the company’s net income is zero ( Revenues = Total cost );

In the case of perfect competition, the quantity at which price, average revenue, and marginal revenue equal average total cost

Question 12

Bridge financing

Answer 12

Interim financing that provides funds until permanent financing can be arranged

Question 13

Broad money

Answer 13

Encompasses narrow money plus the entire range of liquid assets that can be used to make purchases

Question 14

Broker

Answer 14

an agent who executes orders to buy or sell securities on behalf of a client in exchange for a commission.

Question 15

Broker-dealer

Answer 15

A financial intermediary (often a company) that may function as a principal (dealer) or as an agent (broker) depending on the type of trade

Question 16

Brokered market

Answer 16

A market in which brokers arrange trades among their clients

Question 17

Budget surplus / deficit

Answer 17

The difference between government revenue and expenditure for a stated fixed period of time

Question 18

Bullet bond

Answer 18

Bond in which the principal repayment is made entirely at maturity

Question 19

Business risk

Answer 19

The risk associated with operating earnings.

Operating earnings are uncertain because total revenues and many of the expenditures contributed to produce those revenues are uncertain

Question 20

Buy-side firm

Answer 20

An investment management company or other investor that uses the services of brokers or dealers (i.e. the client of the sell side firm)