Finance & Economics

Question 1

series EE bonds

Answer 1

Treasuries that earn interest through semi-annual increases in value (accruals) for up to 30 years. The purchase price of a bond is 50% of its face amount–a $100 bond costs $50. The rates are marekt based, adjusted every 6 months. Interest is hit with fed tax, but no state or local taxes unless made exempt from Fed via post-secondary education exemption. EE: Cannot be traded.

Question 2

T-Bill

Answer 2

short-term direct obligation of the U.S. Treasury. 13-, 26- or 52-week maturity.

Question 3

T-Note

Answer 3

Medium-term obligation of the U.S. Treasury: Two- to ten-year maturities.

Question 4

T-Bond

Answer 4

Long-term obligations of the U.S Treasury, i.e., > 10 yrs.

Question 5

pari passu

Answer 5

legal principle that says all bonds with the same ranking in a company’s capital structure should be treated equally

Question 6

Hauser’s Law

Answer 6

the (controversial) proposition that, in the US, federal tax revenues since World War II have always been approximately equal to 19.5% of GDP, regardless of wide fluctuations in the marginal tax rate

Question 7

Baumol’s cost disease

Answer 7

Predicts that service-intensive areas of the economy like the performing arts will grow more costly in comparison to other sectors in which productivity gains are easier to achieve

Question 8

lessor

Answer 8

landlord

Question 9

lessee

Answer 9

someone who is renting a property; tenant

Question 10

backwardation

Answer 10

a situation in which the spot or cash price of a commodity is higher than the forward price, indicating tight markets (spike in demand or drop in supply).

Opposite: Contango

Question 11

contango

Answer 11

describes situation when the forward price of a futures contract is higher than the spot price.