Financial Terms Main Page

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Beta equation (Mutual Funds)

The beta of a fund is determined as follows:
[(n) (sum of (xy)) ]-[ (sum of x) (sum of y)]
[(n) (sum of (xx)) ]-[ (sum of x) (sum of x)]
where: n = # of observations (36 months)
x = rate of return for the S&P 500 Index
y = rate of return for the fund

Delta hedge

A dynamic hedging strategy using options with continuous adjustment of the number of options
used, as a function of the delta of the option.

Dollar bonds

Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
"U.S. Dollar" bonds, a common term of reference in the Eurobond market.

Growing perpetuity

A constant stream of cash flows without end that is expected to rise indefinitely.

Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.

Omnibus account

An account carried by one futures commission merchant with another futures commission
merchant in which the transactions of two or more persons are combined and carried in the name of the
originating broker, rather than designated separately. Related: commission house.

Prime rate

The interest rate at which banks lend to their best (prime) customers. Much more often than not, a
bank's most creditworthy customers borrow at rates below the prime rate.

Subject to opinion

An auditor's opinion reflecting acceptance of a company's financial statements subject to
pervasive uncertainty that cannot be adequately measured, such as information relating to the value of
inventories, reserves for losses, or other matters subject to judgment.

Yankee CD

CD issued in the domestic market, typically New York, by a branch of a foreign bank.

LIABILITIES

What a company owes to its creditors. In other words, debts.

Accumulated depreciation

A contra-fixed asset account representing the portion of the cost of a fixed asset that has been previously charged to expense. Each fixed asset account will have its own associated accumulated depreciation account.

ethical standard

a standard representing beliefs about moral
and immoral behaviors

Trough

The lower turning point of a business cycle, where a contraction turns into an expansion.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.

Initial Public Offering

A firms first offering of its shares to the investment public, after registration requirements of the various securities regulators have been met.

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