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Definition of Overshooting
The tendency of a pool of MBSs to reflect an especially high rate or prepayments the first time
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
(1) The estimated useful life of the fixed asset being depreciated is
Any of several methods that recognize an increased amount
A method of investment appraisal that measures
the rate of earnings obtained on the average capital investment over the life of a capital project; computed as average annual profits divided by average investment; not based on cash flow
A strategy that uses available information and forecasting techniques to seek a
Publicly traded issues that may be collateralized by mortgages and MBSs.
Money after-tax rate of return minus the inflation rate.
The discount rate that reflects only the business risks of a project and abstracts from the
Swap in which the principal or national amount rises (falls) as interest rates
date on which particular news concerning a given company is announced to the public.
The periodic rate times the number of periods in a year. For example, a 5%
Interest rate that is annualized using simple interest.
Arithmetic mean return.
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
Average rate of return (ARR)
The ratio of the average cash inflow to the amount invested.
Average tax rate
Taxes as a fraction of income; total taxes divided by total taxable income.
average tax rate
Total taxes owed divided by total income.
A strategy in which the maturities of the securities included in the portfolio are concentrated
Base interest rate
Related: Benchmark interest rate.
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Also called on-the-run or current coupon issues or bellwether issues. In the secondary
Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees
A committee formed in response to SEC chairman Arthur Levitt's initiative to improve the financial
book rate of return
Accounting income divided by book value.
Break-even payment rate
The prepayment rate of a MBS coupon that will produce the same CFY as that of
Break-even tax rate
The tax rate at which a party to a prospective transaction is indifferent between entering
Related: Premium payback period.
Broker loan rate
Related: Call money rate.
A strategy in which a portfolio is constructed so that the maturities of its securities are highly
A passive investment strategy with no active buying and selling of stocks from the
A date before maturity, specified at issuance, when the issuer of a bond may retire part of the bond
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
A discount rate used to find the present value of a series of future cash receipts. Sometimes called discount rate.
cash burn rate
A relatively recent term that refers to how fast a business
Cash flow time-line
Line depicting the operating activities and cash flows for a firm over a particular period.
Cheapest to deliver issue
The acceptable Treasury security with the highest implied repo rate; the rate that a
A strategy in which a put and with the same strike price and expiration are either both
a foundation for the compensation plan that addresses the role compensation should play in the organization
computer integrated manufacturing (CIM)
the integration of two or more flexible manufacturing systems through the use of a host computer and an information networking system
an organizational strategy in which company management decides to confront, rather than avoid, competition; an organizational strategy in which company management still attempts to differentiate company
A firm engaged in two or more unrelated businesses.
A merger involving two or more firms that are in unrelated businesses.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
A federal Act
The percentage tax charged by a state to an employer to
The acquisition of one firm by anther firm.
Debt obligations issued by corporations.
A legal document creating a corporation.
One of the three areas of the discipline of finance. It deals with the operation of the firm
Corporate financial management
The application of financial principals within a corporation to create and
Corporate financial planning
Financial planning conducted by a firm that encompasses preparation of both
Corporate processing float
The time that elapses between receipt of payment from a customer and the
Corporate tax view
The argument that double (corporate and individual) taxation of equity returns makes
Corporate taxable equivalent
rate of return required on a par bond to produce the same after-tax yield to
cost leadership strategy
a plan to achieve the position in a
The costs of (cross-functional) business processes, irrespective of the organizational structure of the business.
a collection of monetary amounts incurred either
A cluster of cost items.
The dates when the coupons are paid. Typically a bond pays
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
The rate of interest paid on a debt security. Generally stated on an
The nominal interest rate that the issuer promises to pay the
Annual interest payment as a percentage of face value.
Covered call writing strategy
A strategy that involves writing a call option on securities that the investor
Covered or hedge option strategies
Strategies that involve a position in an option as well as a position in the
The interest rate offered on an investment type insurance policy.
The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
The return at which two alternative projects have the same net present value.
Related: Benchmark issues
In Treasury securities, the most recently auctioned issue. Trading is more active in current
Current rate method
Under this currency translation method, all foreign currency balance-sheet and income
the time between the placement of an order to
Date of payment
date dividend checks are mailed.
Date of record
date on which holders of record in a firm's stock ledger are designated as the recipients of
Treating cash flows as being received on exact dates - date 0, date 1, and so forth - as
The date on which a firm's directors meet and announce the date and amount of the next
The date on which the board of directors has declared a dividend.
Refers to multi-period cash flow matching.
a technique for avoiding competition by distinguishing a product or service from that of competitors through adding sufficient value (including quality and/or features) that customers are willing to pay
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.
The interest rate that the Federal Reserve charges a bank to borrow funds when a bank is
The rate of interest used to calculate the present value of a stream
the rate of return used to discount future cash
Interest rate used to compute present values of future cash flows.
The interest rate at which the Fed is prepared to loan reserves to commercial banks.
A rate of return used to convert a monetary sum, payable or receivable in the future, into present value.
The fixed or floating rate paid on preferred stock based on par value.
Dollar-weighted rate of return
Also called the internal rate of return, the interest rate that will make the
Eurobonds that pay coupon interest in one currency but pay the principal in a different
Effective annual interest rate
An annual measure of the time value of money that fully reflects the effects of
effective annual interest rate
Interest rate that is annualized using compound interest.
In an interest rate swap, the date the swap begins accruing interest.
Effective Exchange Rate
The weighted average of several exchange rates, where the weights are determined by the extent of our trade done with each country.
Effective Interest Rate
The rate of interest actually earned on an investment. It is
A measure of the time value of money that fully reflects the effects of compounding.
Effective Tax Rate
The total tax provision divided by pretax book income from continuing
Emerging Issues Task Force (EITF)
A special committee of the Financial Accounting Standards Board established to reach consensus of how to account for new and unusual financial transactions that have the potential for creating differing financial reporting practices.
Emerging Issues Task Force (EITF)
A separate committee within the Financial Accounting Standards Board composed of 13 members representing CPA firms and preparers of financial statements
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