Terminology Flashcards
The distribution of assets across different asset classes to create a portfolio with the desired risk and return characteristics
Asset Allocation
A group of securities that exhibit similar characteristics and behave similarly in different market conditions.
Asset Class
The change in price during a period divided by the beginning price
Capital Gains Yield
The interest rate paid to bond holders for “lending” their money to the bond issuer.
Coupon Rate
A rating of a bond issuers ability to repay interest and principal
Credit Quality
The current rate of return on an investment calculated by dividing its expected income payments by its current market price.
Current Yield
The gain or loss, in dollars, on an investment owned over a period of time
Dollar Return
The amount by which the market price of a bond is below the principal due at maturity
Discount
Income received for holding the investment expressed as a percentage of the beginning price.
Income Yield
an asset that can be sold quickly without significant price concession
Liquidity
A legal entity that sells securities for the purpose of financing its operations
Issuer
The length of time until the principal amount of a bond must be repaid
Maturity
The interest rate to be paid by the issuer on the face value of the bond
Nominal Yield
The face value of a bond (i.e. the dollar amount assigned to the bond when its first issued)
Par
The amount by which the market price of a bond is above the principal amount due at maturity
Premium
Original amount borrowed on a bond
Principal
The return on an investment measured as a percentage of the originally invested sum that accounts for all cash flows and capital gains or losses; allows for comparison among different types of investments.
Rate of Return aka Total Return (%)
The rate of return on short-term debt issued by the United States Government (treasury bills)
“Risk-Free” Rate
The differential over the risk free rate of return paid to compensate investors for risk exposure
Risk Premium
Growth of an investment at the “risk-free”rate; compensation for ‘waiting’
Time Value of Money
Stock price multiplied by the number of outstanding shares of a stock, or the total value of the company’s stock
Total Market Capitalization (“Market Cap”)
The amount and frequency of fluctuations in the price of security, commodity, or a market index within a specified time period.
Volatility
The rate of return on a bond if it is held until maturity
Yield to Maturity
