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Definition of Discount bond
Debt sold for less than its principal value. If a discount bond pays no interest, it is called a
A bond with no coupons, priced below its face value; the return on this bond comes from the difference between its face value and its current price.
A bond issued with a very low coupon or no coupon and selling at a price far below par
A bond that will make only one payment of principal and interest. Also called a zerocoupon
Corporate taxable equivalent
Rate of return required on a par bond to produce the same after-tax yield to
Any bond with a coupon. Contrast with discount bond.
A short-term (less than one year) government discount bond.
See discount bond.
ADF (annuity discount factor)
the present value of a finite stream of cash flows for every beginning $1 of cash flow.
DLOC (discount for lack of control)
an amount or percentage deducted from a pro rata share of the value of 100% of an equity interest in a business, to reflect the absence of some or all of the powers of control.
DLOM (discount for lack of marketability)
an amount or percentage deducted from an equity interest to reflect lack of marketability.
the rate of return on investment that would be required by a prudent investor to invest in an asset with a specific level risk. Also, a rate of return used to convert a monetary sum, payable or receivable in the future, into present value.
fractional interest discount
the 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.
QMDM (quantitative marketability discount model)
model for calculating DLOM for minority interests r the discount rate
Accretion (of a discount)
In portfolio accounting, a straight-line accumulation of capital gains on discount
A bond on which interest accrues, but is not paid to the investor during the time of accrual.
Bank discount basis
A convention used for quoting bids and offers for treasury bills in terms of annualized
bonds that are not registered on the books of the issuer. Such bonds are held in physical form by
bonds are debt and are issued for a period of more than one year. The U.S. government, local
A contract for privately placed debt.
A contractual provision in a bond indenture. A positive covenant requires certain actions, and
Bond equivalent yield
bond yield calculated on an annual percentage rate method. Differs from annual
The contract that sets forth the promises of a corporate bond issuer and the rights of
Designing a portfolio so that its performance will match the performance of some bond index.
A conventional unit of measure for bond prices set at $10 and equivalent to 1% of the $100 face
With respect to convertible bonds, the value the security would have if it were not convertible
The method used for computing the bond-equivalent yield.
The annualized yield to maturity computed by doubling the semiannual yield.
A system that monitors and evaluates the performance of a fixed-income portfolio , as well as the
bonds issued by emerging countries under a debt reduction plan.
bond whose principal repayment is linked to the price of another security. The bonds are
Foreign bond issue made in London.
An incentive offered to purchasers of a firm's product for payment within a specified time
Collateral trust bonds
A bond in which the issuer (often a holding company) grants investors a lien on
Insurance that a construction contract will be successfully completed.
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
bonds that can be converted into common stock at the option of the holder.
A eurobond that can be converted into another asset, often through exercise of
Debt obligations issued by corporations.
High-coupon bonds that sell at only at a moderate premium because they are callable at a
An unsecured bond whose holder has the claim of a general creditor on all assets of the
Referring to the selling price of a bond, a price below its par value. Related: premium.
Present value of $1 received at a stated future date.
The period during which a customer can deduct the discount from the net amount of the bill
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is
Non-interest-bearing money market instruments that are issued at a discount and
Facility provided by the Fed enabling member banks to borrow reserves against collateral
Selling something on a discounted basis is selling below what its value will be at maturity,
Discounted cash flow (DCF)
Future cash flows multiplied by discount factors to obtain present values.
Discounted dividend model (DDM)
A formula to estimate the intrinsic value of a firm by figuring the
Discounted payback period rule
An investment decision rule in which the cash flows are discounted at an
Calculating the present value of a future amount. The process is opposite to compounding.
Dividend discount model (DDM)
A model for valuing the common stock of a company, based on the
Documented discount notes
Commercial paper backed by normal bank lines plus a letter of credit from a
Municipal revenue bonds for which quotes are given in dollar prices. Not to be confused with
Dollar price of a bond
Percentage of face value at which a bond is quoted.
Equivalent bond yield
Annual yield on a short-term, non-interest bearing security calculated so as to be
A bond that is (1) underwritten by an international syndicate, (2) offered at issuance
Eurobonds denominated in U.S.dollars.
Eurobonds denominated in Japanese yen.
bond whose maturity can be extended at the option of the lender or issuer.
Government bonds that are acceptable at par in payment of federal estate taxes when owned by
A bond issued on the domestic capital market of anther company.
Foreign bond market
That portion of the domestic bond market that represents issues floated by foreign
A currency trades at a forward discount when its forward price is lower than its spot price.
Full coupon bond
A bond with a coupon equal to the going market rate, thereby, the bond is selling at par.
General obligation bonds
Municipal securities secured by the issuer's pledge of its full faith, credit, and
bonds that are designed so as to qualify for immediate trading in any domestic capital market
See: Government securities.
High-coupon bond refunding
Refunding of a high-coupon bond with a new, lower coupon bond.
A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
bond whose payments are linked to an index, e.g. the consumer price index.
Industrial revenue bond (IRB)
bond issued by local government agencies on behalf of corporations.
A municipal bond backed both by the credit of the municipal issuer and by commercial
A collective term that refers to global bonds, Eurobonds, and foreign bonds.
Investment grade bonds
A bond that is assigned a rating in the top four categories by commercial credit
A bond with a speculative credit rating of BB (S&P) or Ba (Moody's) or lower is a junk or high
bond with a stream of coupon payments that are the same throughout the life of the bond.
Limited-tax general obligation bond
A general obligation bond that is limited as to revenue sources.
bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.
Low-coupon bond refunding
Refunding of a low coupon bond with a new, higher coupon bond.
bonds with a long current maturity. The "long bond" is the 30-year U.S. government bond.
Floating rate note whose interest rate is reset at more frequent intervals than the rollover
A bond in which the issuer has granted the bondholders a lien against the pledged assets.
State or local governments offer muni bonds or municipals, as they are called, to pay for
Original issue discount debt (OID debt)
Debt that is initially offered at a price below par.
Positive covenant (of a bond)
A bond covenant that specifies certain actions the firm must take. Also called
A bond that is selling for more than its par value.
A bond that the holder may choose either to exchange for par value at some date or to extend for a
Also called a prerefunded bond, one that originally may have been issued as a general
A bond whose issuer records ownership and interest payments. Differs from a bearer bond
A bond issued by a municipality to finance either a project or an enterprise where the issuer
A yen-denominated bond issued in Tokyo by a non-Japanese borrower. Related: bulldog
Corporate bonds arranged so that specified principal amounts become due on specified dates.
bond that may be issued in several series under the same indenture.
Dollar bond issued in Japan by a nonresident.
bonds with short current maturities.
A bond that will make only one payment of principal and interest.
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