Glossary of Terms 6

Question 1

Rack-rented

Answer 1

Rent that would be received for a property if it were subject to immediate open-market rental review.

Question 2

Redemption Yield

Answer 2

The gross redemption yield (or bond yield, or yield to maturity) is the rate of return at which the discounted value of all future payments of interest an capital is equal to the “dirty” price of the bond. The net redemption yield allows for taxation of the amounts received by the investor.

Question 3

Relationship Banks

Answer 3

A model of banking where a financial institution attempts to provide its clients with a full range of products and services, and to engage in a continuous and detailed dialogue about business requirements, in order to create a long-term business relationship.

Question 4

Reverse Yield Gap

Answer 4

The long-dated gilt yield minus the equity yield.

It is now commonly referred to as the yield gap (equity yield less the gilt yield) as this is now typically positive.

Question 5

Reversion Interest

Answer 5

The interest of a freeholder or long term leaseholder, to whom the property will revert on expiry of a lease.

Question 6

Rights Issue

Answer 6

A rights issue is where a company issues further shares, at a given price, to existing shareholders in proportion to their existing shareholdings. For example, a 1-for-5 rights issue allows each shareholder to buy one new share for each five currently held. The purpose is for the issuing company to raise more money.

Question 7

Running Yield

Answer 7

The annual income on an investment divided by its current market value. Important examples are the flat yield on gilts, the gross dividend yield on equities and the rental yield on property.