Term 1: Financial Markets and Instruments, Quizzes of Finance

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TERM 1 Compound interest DEFINITION 1 Interest that is earned on a given deposit and has become part of the principal at the end of a specified period TERM 2 Principal DEFINITION 2 The amount of money on which interest is paid TERM 3 Discounting cash flows DEFINITION 3 The process of finding present values; the inverse of compounding interest TERM 4 Nominal rate of interest DEFINITION 4 Th actual rate of interest charged by the supplier of funds and paid by the demander TERM 5 Deflation DEFINITION 5 A general trend of falling prices TERM 6 Term Structure of interest rates DEFINITION 6 The relationship between the maturity and rate of return for bonds with similar levels of risk TERM 7 Yield Curve DEFINITION 7 A graphic depiction of the term structure of interest rates TERM 8 Yield to maturity (YTM) DEFINITION 8 Compound annual rate of return earned on a debt security purchased on a given day and held to maturity TERM 9 Inverted yield curve DEFINITION 9 A downward-sloping yield curve inmates that short-term interest rate are generally higher than long-term interest rates TERM 10 Nominal yield curve DEFINITION 10 An upward-sloping yield curve indicates that long-term interest rates are generally higher than short-term interest rates TERM 21 Sinking-fund requirement DEFINITION 21 A restrictive provision often included in a bond indenture, providing for the systematic retirement of bonds prior to their maturity. TERM 22 Trustee DEFINITION 22 A paid individual, corporation, or commercials bam trust department that acts as the third party to a bond indenture and can take specified actions on behalf of the bondholder if the terms of the indenture are violated. TERM 23 Conversion feature DEFINITION 23 A feature of convertible bonds that allows bondholders to change each bond into stated number of shares of common stock. TERM 24 Call feature DEFINITION 24 A feature included in nearly all corporate bond issues that gives the issuer the opportunity to repurchase bonds at a stated call price proper to maturity. TERM 25 Call price DEFINITION 25 The stated price at which a bond may be repurchased, by use of a call feature, prior to maturity. TERM 26 Call premium DEFINITION 26 Tha mount by which a bon's call price exceeds its par value TERM 27 Stock purchase warrants DEFINITION 27 Instruments that give their holders the right to purchase a certain number of shares of the issuer's common stick at a specified price over a certain period of time. TERM 28 Current yield DEFINITION 28 A measure of a bond's cash return for the year; calculated by dividing the bond' annual interest payment by its current price. TERM 29 Eurobond DEFINITION 29 A bond issued by an international borrower and sold to investors in countries with currencies other than the currency in which the bond is denominated TERM 30 Foreign bond DEFINITION 30 A bond that is issued by a foreign corporation or government and is denominated in the investor's home currency and sold in the investor's home market. TERM 31 Debt DEFINITION 31 Includes all borrowing incurred by a firm, including bonds, and is repaid according to a fixed schedule of payments TERM 32 Equity DEFINITION 32 Funds provided by the firm's owners (investors or stockholders) that are repaid subject to the firm's performance TERM 33 Privately owned (stock) DEFINITION 33 The common stock of a firm is owned by private investor; this stock is not publicly traded TERM 34 Publicly owned (stock) DEFINITION 34 The common stock of a firm is owned by public investors this stock is publicly traded TERM 35 Closely owned (stock) DEFINITION 35 The common stock of a firm is owned by an individual or a small group of investors (such as a family) these are usually privately owned companies TERM 46 proxy statement DEFINITION 46 A statement transferring the vote of a stockholder to another party TERM 47 proxy battle DEFINITION 47 The attempt by a non management group to gain control of the management of a firm by soliciting a sufficient number of proxy votes TERM 48 Supervoting shares DEFINITION 48 Stock that carries with it multiple votes per share rather than the single vote per share typically given on a regular shares of a common stock TERM 49 Nonvoting common stock DEFINITION 49 Common stock that carries no voting rights; issued when the firm wishes to raise capital through the sale of a common stock but does not want to give up its voting control TERM 50 American depository shares (ADS's) DEFINITION 50 Dollar-denominated receipts for the stocks of foreign companies that are held by a U.S financial institution overseas. TERM 51 American depository receipts (ADRs) DEFINITION 51 Securities, backed by American depository shares (ADSs), that permit U.S investors to hold shares of non U.S companies and trade them in U.S markets. TERM 52 par-value preferred stock DEFINITION 52 Preferred stock with a stated face value that is used with the specified dividend percentage to determine the annual dollar dividend TERM 53 no-par preferred stock DEFINITION 53 Preferred stock with no stated face value but with a stated annual dollar dividend