Test 1 | FINA 3001 - Financial Management, Quizzes of Financial Management

Download Test 1 | FINA 3001 - Financial Management and more Quizzes Financial Management in PDF only on Docsity! TERM 1 Compounding DEFINITION 1 the process of accumulating interest on an investment over time to earn more interest TERM 2 future value (FV) DEFINITION 2 the amount an investment is worth after one or more periods TERM 3 interest on interest DEFINITION 3 interest earned on the reinvestment to previous interest payments TERM 4 compound interest DEFINITION 4 interest earned on both the initial principal and the interest reinvested from prior periods TERM 5 simple interest DEFINITION 5 interest earned only on the original principal amount invested TERM 6 present value (PV) DEFINITION 6 the current value of further cash flows discounted at the appropriate discount rate TERM 7 annuity DEFINITION 7 a level stream of cash flows for a fixed period of time TERM 8 annuity due DEFINITION 8 an annuity for which the cash flows occur at the beginning of the period TERM 9 perpetuity DEFINITION 9 an annuity in which the cash flows continue forever TERM 10 consol DEFINITION 10 a type of perpetuity TERM 21 registered form DEFINITION 21 the form of bond issue in which the registrar of the company records ownership of each bond; payment is made directly to the owner of record TERM 22 bearer form DEFINITION 22 the form of bond issue in which the bond is issued without record of the owner's name; payment made to whomever holds the bond TERM 23 debenture DEFINITION 23 an unused debt, usually with a maturity of 10 years or more TERM 24 note DEFINITION 24 an unsecured debt, usually with a maturity under 10 years TERM 25 sinking fraud DEFINITION 25 an account managed by the bond trustee for early bond redemption TERM 26 call provision DEFINITION 26 an agreement giving the corporation the option to repurchase a bond at a specified price prior to maturity TERM 27 call premium DEFINITION 27 the amount by which the call price exceeds the par value of a bond TERM 28 deferred call provision DEFINITION 28 a call provision prohibiting the company from redeeming a bond prior to a certain date TERM 29 call-protected bond DEFINITION 29 a bond that, during certain period, cannot be redeemed by the issuer TERM 30 protective covenant DEFINITION 30 a part of the indenture limiting certain actions that might be taken during the term of the loan, usually to protect the lender's interest TERM 31 zero coupon bond DEFINITION 31 a bond that makes no coupon payments and is thus initially priced at a deep discount TERM 32 bid price DEFINITION 32 the price a dealer is willing to pay for a security TERM 33 asked price DEFINITION 33 the price a dealer is willing to take for a security TERM 34 bid-ask spread DEFINITION 34 the difference between the bid price and the asked price TERM 35 clean price DEFINITION 35 the price of a bond net of accrued interest; this is the price that is typically quoted TERM 46 liquidity premium DEFINITION 46 the portion of a nominal interest rate or bond yield that represents compensation for lack of liquiditybonds that have more frequent trading will generally have lower required returns TERM 47 capital budgeting DEFINITION 47 the process of planning and managing a firm's long term investment TERM 48 capital strucure DEFINITION 48 the mixture of debt and equity maintained by a firm TERM 49 working capital DEFINITION 49 a firm's short-term assets and liabilities TERM 50 sole proprietorship DEFINITION 50 a business owned by a single individual TERM 51 partnership DEFINITION 51 a business formed by two or more individuals or entities TERM 52 corporation DEFINITION 52 a business created as a distinct legal entity composed of one or more individuals or entities TERM 53 agency problem DEFINITION 53 the possibility of conflict of interest between the stockholders and management of a firm TERM 54 stakeholder DEFINITION 54 someone other than stockholder or creditor who potentially has a claim on the cash flows of the firm TERM 55 T-Bills DEFINITION 55 pure discount bonds with original maturity of one year or less TERM 56 T-notes DEFINITION 56 coupon debt with original maturity between one and ten years TERM 57 T-bonds DEFINITION 57 coupon debt with original maturity greater than ten years TERM 58 Municipal Securities DEFINITION 58 debt of state and local gov'tsvarying degrees of default risk, rated similar to corporate debtinterest received is tax- exempt at the federal level TERM 59 legal default DEFINITION 59 failure to pay either principal or interest TERM 60 bond ratings DEFINITION 60 provide guidance for likelihood of default and recovery given default