12.7: Key Terms
- Page ID
- 94697
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- bond returns
- sums the periodic interest payments and the change in bond price in a given period and divides by the bond price at the beginning of the period
- commercial paper (CP)
- a short-term, unsecured security issued by corporations and financial institutions to meet short-term financing needs such as inventory and receivables
- debenture
- a common type of unsecured bond issued by a corporation
- indenture
- legal term for a bond contract
- inflation
- a general increase in prices and a reduction in purchasing power; expected rate is a key component of interest rates
- initial public offering (IPO)
- the first time a firm offers stock to the public
- mortgage bond
- bond issued by a corporation using a real asset, such as property or buildings, to guarantee it
- municipal bonds (munis)
- bonds issued by a local government, territory, or agency; generally used to finance infrastructure projects
- negotiable certificates of deposit (NCDs)
- large CDs issued by financial institutions; redeemable at maturity but can trade prior to maturity in a broad secondary market
- primary market
- market for new securities
- seasoned equity offering (SEO)
- a method used by new IPOs to raise capital by offering additional shares of stock to the public
- secondary market
- market for used securities
- shelf registration
- part of Securities and Exchange Commission (SEC) Rule 415; allows a company to register with the SEC to issue new shares but allows up to two years before issuing the shares
- special purpose acquisition companies (SPACs)
- a special form of IPO
- stock returns
- sums the periodic dividend payments plus the change in stock price in a given period divided by the stock price at the beginning of the period
- total returns
- the sum of all cash flows received from an investment; includes periodic cash flows plus price appreciation or price depreciation
- Treasury bills (T-bills)
- short-term debt instruments issued by the federal government and maturing in a year or less
- Treasury bonds
- government debt instruments with maturities of 20 or 30 years
- Treasury notes (T-notes)
- government debt instruments with maturities of 2, 3, 5, 7, or 10 years