Financial Terms
Term to maturity

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Definition of Term to maturity

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Term to maturity

The time remaining on a bond's life, or the date on which the debt will cease to exist and
the borrower will have completely paid off the amount borrowed. See: maturity.


Term to Maturity

Period of time from the present to the redemption date of a bond.



Related Terms:

Macaulay duration

The weighted-average term to maturity of the cash flows from the bond, where the
weights are the present value of the cash flow divided by the price.


savings funds

Mutual funds that seek to preserve capital. This type of fund invests primarily in short-term securities with an average term to maturity of one year or less, or in the case of money market funds, 90 days or less.


Term

See term to maturity.


Average maturity

The average time to maturity of securities held by a mutual fund. Changes in interest rates
have greater impact on funds with longer average life.



Balloon maturity

Any large principal payment due at maturity for a bond or loan with or without a a sinking
fund requirement.


Coefficient of determination

A measure of the goodness of fit of the relationship between the dependent and
independent variables in a regression analysis; for instance, the percentage of variation in the return of an
asset explained by the market portfolio return.


Term To Maturity Image 2

coefficient of determination

a measure of dispersion that
indicates the “goodness of fit” of the actual observations
to the least squares regression line; indicates what proportion
of the total variation in y is explained by the regression model


Credit Terms

Conditions under which credit is extended by a lender to a borrower.


Current maturity

Current time to maturity on an outstanding debt instrument.
Current / noncurrent method
Under this currency translation method, all of a foreign subsidiary's current
assets and liabilities are translated into home currency at the current exchange rate while noncurrent assets
and liabilities are translated at the historical exchange rate, that is, the rate in effect at the time the asset was
acquired or the liability incurred.


Deterministic models

Liability-matching models that assume that the liability payments and the asset cash
flows are known with certainty. Related: Compare stochastic models


Disintermediation

Withdrawal of funds from a financial institution in order to invest them directly.


Euro-medium term note (Euro-MTN)

A non-underwritten Euronote issued directly to the market. Euro-
MTNs are offered continuously rather than all at once as a bond issue is. Most Euro-MTN maturities are
under five years.


Financial intermediaries

Institutions that provide the market function of matching borrowers and lenders or
traders.


financial intermediary

Firm that raises money from many small investors and provides financing to businesses or other
organizations by investing in their securities.


Financial Intermediary

Any institution, such as a bank, that takes deposits from savers and loans them to borrowers.


Financial Intermediation

The process whereby financial intermediaries channel funds from lender/savers to borrower/spenders.


Flexible Term

Optional periods of time which the conditions of a contract will be carried out.



Held-to-Maturity Security

A debt security for which the investing entity has both the positive
intent and the ability to hold until maturity.


Intermarket sector

spread The spread between the interest rate offered in two sectors of the bond market for
issues of the same maturity.


Intermarket spread swaps

An exchange of one bond for another based on the manager's projection of a
realignment of spreads between sectors of the bond market.


Intermediary

An independent third party that may act as a mediator during negotiations.


Intermediate Good

A good used in producing another good.


Intermediate-term

Typically 1-10 years.


Intermediation

Investment through a financial institution. Related: disintermediation.


Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.


Long-term

In accounting information, one year or greater.


Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.



Long-term debt

An obligation having a maturity of more than one year from the date it was issued. Also
called funded debt.


Long-term debt

A debt for which payments will be required for a period of more than
one year into the future.


Long Term Debt

Liability due in a year or more.


Long-term debt/capitalization

Indicator of financial leverage. Shows long-term debt as a proportion of the
capital available. Determined by dividing long-term debt by the sum of long-term debt, preferred stock and
common stockholder equity.


Long-term debt ratio

The ratio of long-term debt to total capitalization.


Long-term debt to equity ratio

A capitalization ratio comparing long-term debt to shareholders' equity.


Long-term financial plan

Financial plan covering two or more years of future operations.


Long-term liabilities

Amount owed for leases, bond repayment and other items due after 1 year.


LONG-TERM LIABILITIES

Bills that are payable in more than one year, such as a mortgage or bonds.


Long-term liabilities

Amounts owing after more than one year.


Longer-Term Fixed Assets

Assets having a useful life greater than one year but the duration of the 'long term' will vary with the context in which the term is applied.


Maturity

For a bond, the date on which the principal is required to be repaid. In an interest rate swap, the
date that the swap stops accruing interest.


Maturity

The date or the number of days until a security is due to be paid or
a loan is to be repaid


Maturity

Time at which a bond can be redeemed for its face value.


Maturity

The time when a policy or annuity reaches the end of its span.


Maturity date

The date when the issuer returns the final face value of a bond
to the buyer.


Maturity Date

Date on which a debt is due for payment.


Maturity factoring

Factoring arrangement that provides collection and insurance of accounts receivable.


Maturity phase

A phase of company development in which earnings continue to grow at the rate of the
general economy. Related: Three-phase DDM.


maturity premium

Extra average return from investing in longversus short-term Treasury securities.


Maturity spread

The spread between any two maturity sectors of the bond market.


Maturity value

Related: par value.


Medium-term note

A corporate debt instrument that is continuously offered to investors over a period of
time by an agent of the issuer. Investors can select from the following maturity bands: 9 months to 1 year,
more than 1 year to 18 months, more than 18 months to 2 years, etc., up to 30 years.


Original maturity

maturity at issue. For example, a five year note has an original maturity of 5 years; one
year later it has a maturity of 4 years.


Other long term liabilities

Value of leases, future employee benefits, deferred taxes and other obligations
not requiring interest payments that must be paid over a period of more than 1 year.


predetermined overhead rate

an estimated constant charge per unit of activity used to assign overhead cost to production or services of the period; it is calculated by dividing total budgeted annual overhead at a selected level of volume or activity by that selected measure of volume or activity; it is also the standard overhead application rate


Projected maturity date

With CMOs, final payment at the end of the estimated cash flow window.


Remaining maturity

The length of time remaining until a bond's maturity.


Repayment Terms

The length of time given a borrower by a lender to repay a debt and the frequency of principal payments which the borrower has to meet.


Return-to-maturity expectations

A variant of pure expectations theory which suggests that the return that an
investor will realize by rolling over short-term bonds to some investment horizon will be the same as holding
a zero-coupon bond with a maturity that is the same as that investment horizon.


Short-term financial plan

A financial plan that covers the coming fiscal year.


Short-term investment services

Services that assist firms in making short-term investments.


Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including
1) the current ratio,
2) the acid-test ratio,
3) the inventory turnover ratio, and
4) the accounts receivable turnover ratio.


Short-term tax exempts

Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.


Stated maturity

For the CMO tranche, the date the last payment would occur at zero CPR.


Term

This is usually the duration of a loan.


term

The period of time during which a financial contract – such as a GIC or a loan – is in force.


Term

The time period during which a policy is in force, or the time it takes for a policy to reach maturity.


Term bonds

Often referred to as bullet-maturity bonds or simply bullet bonds, bonds whose principal is
payable at maturity. Related: serial bonds


Term Deposit

An interest-earning bank deposit that cannot be withdrawn without penalty until a specific time.


Term Fed Funds

Fed Funds sold for a period of time longer than overnight.


Term insurance

Provides a death benefit only, no build-up of cash value.


Term Life

A product that provides life coverage for a specified duration typically not beyond the age of 75.


Term life insurance

A contract that provides a death benefit but no cash build-up or investment component.
The premium remains constant only for a specified term of years, and the policy is usually renewable at the
end of each term.


Term Life Insurance

A plan of insurance which covers the insured for only a certain period of time and not necessarily for his or her entire life. The policy pays a death benefit only if the insured dies during the term.


Term loan

A bank loan, typically with a floating interest rate, for a specified amount that matures in between
one and ten years and requires a specified repayment schedule.


Term Loan

A secured loan made to business concerns for a specific period (normally three to ten years). It is repaid with interest, usually with periodical payments.


Term premiums

Excess of the yields to maturity on long-term bonds over those of short-term bonds.


Term repo

A repurchase agreement with a term of more than one day.
term structure of interest rates
Relationship between interest rates on bonds of different maturities usually
depicted in the form of a graph often depicted as a yield curve. Harvey shows that inverted term structures
(long rates below short rates) have preceded every recession over the past 30 years.


Term Sheet

A list of the major points of the proposed financing being offered by an investor.


Term structure

The relationship between the yields on fixed-interest
securities and their maturity dates. Expectation of changes in interest rates
affects term structure, as do liquidity preferences and hedging pressure. A
yield curve is one representation in the term structure.


Term Structure of Interest Rates

Relationship among interest rates on bonds with different terms to maturity.


Term trust

A closed-end fund that has a fixed termination or maturity date.


Terminal Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become terminally ill. The payment is made to your creditors to pay off your debt owing.


Terminal value

The value of a bond at maturity, typically its par value, or the value of an asset (or an entire
firm) on some specified future valuation date.


Terminate

Cease all legal obligations under a contract.


Termination Pay

Additional pay due to an employee whose employment is
being terminated, usually in accordance with a termination pay schedule contained
within the employee manual.


Terms of sale

Conditions on which a firm proposes to sell its goods services for cash or credit.


terms of sale

Credit, discount, and payment terms offered on a sale.


Terms of trade

The weighted average of a nation's export prices relative to its import prices.


Terms of Trade

The quantity of imports that can be obtained for a unit of exports, measured by the ratio of an export price index to an import price index.


Time to maturity

The time remaining until a financial contract expires. Also called time until expiration.


Weighted average maturity

The WAM of a MBS is the weighted average of the remaining terms to maturity
of the mortgages underlying the collateral pool at the date of issue, using as the weighting factor the balance
of each of the mortgages as of the issue date.


Weighted average remaining maturity

The average remaining term of the mortgages underlying a MBS.


Yearly Renewable Term Insurance

Sometimes, simply called YRT, this is a form of term life insurance that may be renewed annually without evidence of insurability to a stated age.


Yield to maturity

The percentage rate of return paid on a bond, note or other fixed income security if you
buy and hold it to its maturity date. The calculation for YTM is based on the coupon rate, length of time to
maturity and market price. It assumes that coupon interest paid over the life of the bond will be reinvested at
the same rate.


Yield to Maturity

The measure of the average rate of return that will be earned on a
debt security held until it matures


Yield to maturity

A measure of the average rate of return that will be earned
on a bond if held to maturity.


yield to maturity

Interest rate for which the present value of the bond’s payments equals the price.


Basis price

Price expressed in terms of yield to maturity or annual rate of return.


Bond

A long-term debt instrument in which the issuer (borrower) is
obligated to pay the investor (lender) a specified amount of
money, usually at specific intervals, and to repay the principal
amount of the loan at maturity. The periodic payments are based
on the rate of interest agreed upon at the time the instrument is
sold.



 

 

 

 

 

 

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