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Certainty equivalent |
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Definition of Certainty equivalentCertainty equivalentAn amount that would be accepted in lieu of a chance at a possible higher, but
Related Terms:Risk-adjusted profitabilityA probability used to determine a "sure" expected value (sometimes called a Bond equivalent yieldBond yield calculated on an annual percentage rate method. Differs from annual Bond-equivalent basisThe method used for computing the bond-equivalent yield. Bond-equivalent yieldThe annualized yield to maturity computed by doubling the semiannual yield. Cash and equivalentsThe value of assets that can be converted into cash immediately, as reported by a Cash equivalentA short-term security that is sufficiently liquid that it may be considered the financial Cash-equivalent itemsTemporary investments of currently excess cash in short-term, high-quality Common stock equivalentA convertible security that is traded like an equity issue because the optioned Corporate taxable equivalentRate of return required on a par bond to produce the same after-tax yield to Coupon equivalent yieldTrue interest cost expressed on the basis of a 365-day year. Equivalent annual annuityThe equivalent amount per year for some number of years that has a present Equivalent annual benefitThe equivalent annual annuity for the net present value of an investment project. Equivalent annual cash flowAnnuity with the same net present value as the company's proposed investment. Equivalent annual costThe equivalent cost per year of owning an asset over its entire life. Equivalent bond yieldAnnual yield on a short-term, non-interest bearing security calculated so as to be Equivalent loanGiven the after-tax stream associated with a lease, the maximum amount of conventional Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax Fixed-income equivalentAlso called a busted convertible, a convertible security that is trading like a straight Inflation uncertaintyThe fact that future inflation rates are not known. It is a possible contributing factor to CASH AND CASH EQUIVALENTSThe balance in a company’s checking account(s) plus short-term or temporary investments (sometimes called “marketable securities”), which are highly liquid. Bond Equivalent YieldBond yield calculated on an annual percentage rate method equivalent units of production (EUP)an approximation of the number of whole units of output that could have been equivalent annual costThe cost per period with the same present value as the cost of buying and operating a machine. Cash EquivalentsHighly liquid, fixed-income investments with original maturities of three months or less. Cash EquivalentsInstruments or investments of such high liquidity and safety that they are virtually equal to cash.
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