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Financial Terms | |
Buydowns |
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Definition of BuydownsBuydownsMortgages in which monthly payments consist of principal and interest, with portions of these
Related Terms:Accounting periodThe period of time for which financial statements are produced – see also financial year. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Accrued InterestThe amount of interest accumulated on a debt security between Accrued InterestThe amount of interest owing but not paid. Adjusted Cash Flow Provided by Continuing OperationsCash flow provided by operating Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Annualized holding period returnThe annual rate of return that when compounded t times, would have ![]() Annuity PeriodThe time between each payment under an annuity. Average Amortization PeriodThe average useful life of a company's collective amortizable asset base. Average Collection PeriodAverage number of days necessary to receive cash for the sale of Average collection period, or days' receivablesThe ratio of accounts receivables to sales, or the total Back-to-back loanA loan in which two companies in separate countries borrow each other's currency for a Balance of paymentsA statistical compilation formulated by a sovereign nation of all economic transactions Balance of PaymentsThe difference between the demand for and supply of a country's currency on the foreign exchange market. Balance of Payments AccountsA statement of a country's transactions with other countries. Base interest rateRelated: Benchmark interest rate. ![]() Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will benefits-provided rankinga listing of service departments in an order that begins with the one providing the most service Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Borrower (Credit Insurance)A consumer who borrows money from a lender. Borrower falloutIn the mortgage pipeline, the risk that prospective borrowers of loans committed to be Bridge LoanA short term loan to cover the immediate cash requirements until permanent financing is received. Broker loan rateRelated: Call money rate. Builder buydown loanA mortgage loan on newly developed property that the builder subsidizes during the Bullet loanA bank term loan that calls for no amortization. Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Capitalized Interestinterest incurred during the construction period on monies invested in ![]() Cash flow after interest and taxesNet income plus depreciation. Cash Flow Provided by Operating ActivitiesWith some exceptions, the cash effects of transactions Cash Flow Provided or Used from Financing ActivitiesCash receipts and payments involving Cash Flow Provided or Used from Investing ActivitiesCash receipts and payments involving Clearing House Automated Payments System (CHAPS)A computerized clearing system for sterling funds Clearing House Interbank Payments System (CHIPS)An international wire transfer system for high-value co-borrowerA co-borrower is the secondary borrower on a borrowing account. The primary borrower will receive mailed monthly statements while the co-borrower has the option to choose whether or not he/she will also receive statements. Commercial Business Loan (Credit Insurance)An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes. Compound interestinterest paid on previously earned interest as well as on the principal. Compound Interestinterest paid on principal and on interest earned in previous compound interesta method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest compound interestinterest earned on interest. Compound Interestinterest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest. Compounding periodThe length of the time period (for example, a quarter in the case of quarterly compounding periodthe time between each interest computation Counterparty Partyon the other side of a trade or transaction. Counterparty riskThe risk that the other party to an agreement will default. In an options contract, the risk Coupon paymentsA bond's interest payments. Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Credit periodThe length of time for which the customer is granted credit. Critical Growth PeriodsTimes in a company's history when growth is essential and without which survival of the business might be in jeopardy. Daily Interest AccumulationAccount in which interest is accrued daily and credited to the account at the end of a specified time. Dealer loanOvernight, collateralized loan made to a dealer financing his position by borrowing from a Demand LoanA loan which must be repaid in full on demand. Discount periodThe period during which a customer can deduct the discount from the net amount of the bill Discounted payback period ruleAn investment decision rule in which the cash flows are discounted at an earnings before interest and income tax (EBIT)A measure of profit that Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. 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 Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of effective annual interest rateinterest rate that is annualized using compound interest. Effective Interest RateThe rate of interest actually earned on an investment. It is Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest Equivalent loanGiven the after-tax stream associated with a lease, the maximum amount of conventional Evaluation periodThe time interval over which a money manager's performance is evaluated. Extended Amortization PeriodAn amortization period that continues beyond a long-lived asset's economic useful life. Extended Amortization PeriodsAmortizing capitalized expenditures over estimated useful lives that are unduly optimistic. Farm Improvement and Marketing Cooperatives Loans ActSee here Federal Home Loan BanksThe institutions that regulate and lend to savings and loan associations. The Fixed Interest RateA rate that does not fluctuate with general market conditions. Fixed-rate loanA loan on which the rate paid by the borrower is fixed for the life of the loan. Fixed Rate Loanloan for a fixed period of time with a fixed interest rate for the life of the loan. Floating Interest RateA rate that fluctuates with general market condition. Forward interest rateinterest rate fixed today on a loan to be made at some future date. fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Freddie Mac (Federal Home Loan Mortgage Corporation)A Congressionally chartered corporation that Full Credit PeriodThe period of trade credit given by a supplier to its customer. GEMs (growing-equity mortgages)Mortgages in which annual increases in monthly payments are used to Generally Accepted Accounting Principals (GAAP)A technical accounting term that encompasses the Grace PeriodA specific period of time after a premium payment is due during which the policy owner may make a payment, and during which, the protection of the policy continues. The grace period usually ends in 30 days. Grace PeriodLength of time during which repayments of loan principal are excused. Usually occurs at the start of the loan period. Graduated-payment mortgages (GPMs)A type of stepped-payment loan in which the borrower's payments Gross interestinterest earned before taxes are deducted. Guaranteed Interest Annuity (GIA)interest bearing investment with fixed rate and term. Guaranteed Interest Certificate (GIC)interest bearing investment with fixed rate and term. Holding periodLength of time that an individual holds a security. Holding period returnThe rate of return over a given period. Insurable InterestIn England in the 1700's it was popular to bet on the date of death of certain prominent public figures. Anyone could buy life insurance on another's life, even without their consent. Unfortunately, some died before it was their time, dispatched prematurely in order that the life insurance proceeds could be collected. In 1774, English Parliament passed a law which restricted the right to be a beneficiary on a life insurance contract to those who would suffer an economic loss when the life insured died. The law also provided that a person has an unlimited insurable interest in his own life. It is still a legal stipulation that an insurance contract is not valid unless insurable interest exists at the time the policy is issued. Life Insurance companies will not, however, issue unlimited amounts of coverage to an individual. The amount of life insurance which will be approved has to approximate the loss caused by the death of the individual and must not result in a windfall for the beneficiary. Intercompany loanloan made by one unit of a corporation to another unit of the same corporation. InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and InterestThe cost of money, received on investments or paid on borrowings. InterestThe cost of funds loaned to an entity. It can also refer to the equity ownership InterestA charge for the use of money supplied by a lender. interestThe cost of a loan or the compensation paid for the use of money. For example, you are paid interest for deposits you make into a savings account, and you pay interest for money that you borrow from a low-cost borrowing account. Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest equalization taxTax on foreign investment by residents of the U.S. which was abolished in 1974. Interest FactorNumbers found in compound interest and annuity tables. Usually called the FVIF or PVIF. Interest incomeIncome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of Mortgages, Treasury Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |