Everything Flashcards
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
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
Coupon (Bonds)
The stated interest payment
made on a bond.
face value or par value
The principal amount of a
bond that is repaid at the
end of the term. Also called
par value .
coupon rate
The annual coupon divided
by the face value of a bond.
maturity
The specified date on
which the principal amount
of a bond is paid
yield to maturity
The interest rate required in the
market on a bond.
Interest Rate Risk: All other things being equal, the longer the time to maturity
the greater the interest
rate risk
All other things being equal, the lower the coupon rate
the greater the interest rate risk
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
debenture
An unsecured debt, usually
with a maturity of 10 years
or more.
sinking fund
An account managed by
the bond trustee for early
bond redemption.
call provision
An agreement giving the corporation the option to repurchase a bond at a specified price prior to maturity.
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
Real interest rate
Interest rates or rates of
return that have been
adjusted for infl ation.
nominal rates
Interest rates or rates of
return that have not been
adjusted for infl ation.
Call options
https://www.youtube.com/watch?v=EfmTWu2yn5Q