SPEA v 361 Exam 2
future value
=FV(rate,nper,pmt,[pv],[type])
Number
=NPER(rate, pmt, pv, [fv],[type])
payment
=PMT(rate, nper, pmt, [fv], [type])
PRICE
=PRICE(settlement, maturity, rate, yld, redemption, frequency)
present value
=PV(rate,nper,pmt,[fv],[type])
rate
=RATE(nper, pmt, pv, [fv], [type], [guess])
yield
=YIELD(settlement, maturity, rate, price, redemption, frequency)
commission broker
NYSE members who execute customer orders to buy and sell stock transmitted to the exchange floor
floor brokers
NYSE members who execute orders for commission brokers on a fee basis
floor traders
NYSE members who trade for their own accounts, trying to anticipate temporary price fluctuations
specialist
a NYSE member action as a dealer in a small number of securities on the exchange floor; often called a market maker
zero coupon rate
a bond that makes no coupon payments and is thus initially priced at a deep discount
call-protected bond
a bond that, during a certain period, cannot be redeemed by the issuer
current yield
a bond's annual coupon divided by its price
deferred call provision
a call provision prohibiting the company from redeeming a bond prior to a certain date
specialist's post
a fixed place on the exchange floor where the specialist operates
proxy
a grant of authority by a shareholder allowing another individual to vote his or her shares
annuity
a level stream of cash flows for a fixed period of time
dividend growth model
a model that determines the current price of a stock as its dividend next period divided by the discount rate less the dividend growth rate
protective covenant
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
treasury yield curve
a plot of the yields on treasury notes and bonds relative to maturity
cumulative voting
a procedure in which a shareholder may bast all votes for one member of the board of directors
straight voting
a procedure in which a shareholder may cast all votes fro each member of the board of directors
dividend yield
a stock's expected cash dividend divided by its current price
consol
a type of perpetuity
electronic communications network (ECN)
a website that allows investors to trade directly with each other
sinking fund
an account managed by the bond trustee for early bond redemption
broker
an agent who arranges security transactions among investors
dealer
an agent who buys and sells securities from inventory
call provision
an agreement giving the corporation the option to repurchase a bond at a specified price prior to maturity
annuity due
an annuity for which the cash flows occur at the beginning of the period
perpetuity
an annuity in which the cash flows continue forever
superDOT system
an electronic NYSE system allowing orders to be transmitted directly to the specialist
debenture
an unsecured debt, usually with a maturity of 10 years or more
note
an unsecured debt, usually with a maturity under 10 years
discount
calculate the present value of some future amount
discounted cash flow (DCF) valuation
calculating the present value of a future cash flow to determine its value today
common stock
equity without priority for dividends or in bankruptcy
compound interest
interest earned on both the initial principal and the interest reinvested from prior periods
interest on interest
interest earned on the reinvestment of previous interest payments
simple interest
interest earned only on the original principle amount invested
real rates
interest rates or rates of return that have been adjusted for inflation
nominal rates
interest rates or rates of return that have not been adjusted for inflation
dividends
payments b a corporation to shareholders, made in either cash or stock
over-the-counter (OTC) market
securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories
preferred stock
stock with dividends priority over common stock, normally with a fixed dividend rate, sometimes without voting rights
call premium
the amount by which the call price exceeds the par value of a bond.
coupon rate
the annual coupon divided by the face value of a bond
interest rate risk premium
the compensation investors demand for bearing interest rate risk
present value (PV)
the current value of the future cash flows discounted at the appropriate discount rate
bid-ask spread
the difference between the bid price and the asked price
capital gains yield
the dividend growth rate, or the rate at which the value of an investment grows.
order flow
the flow of customer orders to buy and sell securities
bearer form
the form of bond issue in which the bond is issued without record of the owners name; payment is made to whomever holds the bond.
registered form
the form of bond issue in which the register of the company records ownership of each bond; payment is made directly to the owner of record.
annual percentage rate (APR)
the interest rate charged per period multiplied by the number of periods per year
effective annual rate (EAR)
the interest rate expressed as if it were compounded once per year
stated interest rate
the interest rate expressed in terms of the interest payment made each period. Also known as the quoted interest rate.
primary market
the market in which new securities are originally sold to investors
secondary market
the market in which previously issued securities are traded among investors
default risk premium
the portion of a nominal interest rate or bond yield that represents compensation for the possibility of default
taxability premium
the portion of a nominal interest rate or bond yield that represents compensation for unfavorable tax status
inflation premium
the portion of a nominal interest rate that represents compensation for expected future inflation
bid price
the price a dealer is willing to pay for a security
asked price
the price a dealer is willing to take for a security
dirty price
the price of a bond including accrued interest, also know as the full or invoice price. This is the price the buyer actually pays
clean brice
the price of a bond net of accrued interest; this is the price that is typically quoted
face value
the principle amount of a bond that is repaid at the end of the term. also called par value
Compounding
the process of accumulating interest on an investment over time to earn more interest
liquidity premium
the proportion of a nominal interest rate or bond yield that represents compensation for lack of liquidity
discount rate
the rate used to calculate the present value of future cash flows
term structure of interest rates
the relationship between nominal interest rates on default-free, pure discount securities and time to maturity; that is, the pure time value of money
fisher efffect
the relationship between nominal returns, real returns, and inflation
maturity
the specific date on which the principle amount of a bond is paid
coupon
the stated interest payment made on a bond
indenture
the written agreement between the corporation and the lender detailing the terms of the debt issue.