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Definition of Underperform
When a security is expected to appreciate at a slower rate than the overall market.
A stock's price movement over the past year as compared to a market index (the S&P 500).
A technical trading strategy that combines mechanical rules, such as the CRISMA
Related: relative strength
Related: relative strength
Idea that the rate of change in the price level of commodities in
The attractiveness measured in terms of risk, liquidity, and return of one instrument relative to
The ratio of the yield spread to the yield level.
security’s risk-free interest rate.
Ratio of the price of one item to the price of another.
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.
Same as PV, but usually includes a subtraction for an initial cash outlay.
a generalization formula invented by Abrams that is the present value of regular but noncontiguous cash flows that have constant growth to perpetuity.
the value in today’s dollars of cash flows that occur in different time periods.
model for calculating DLOM for minority interests r the discount rate
Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.
Any depreciation method that produces larger deductions for depreciation in the
Accounts receivable turnover
The ratio of net credit sales to average accounts receivable, a measure of how
Acquisition of stock
A merger or consolidation in which an acquirer purchases the acquiree's stock.
Active portfolio strategy
A strategy that uses available information and forecasting techniques to seek a
Adjustable rate preferred stock (ARPS)
Publicly traded issues that may be collateralized by mortgages and MBSs.
Adjusted present value (APV)
The net present value analysis of an asset if financed solely by equity
After-tax real rate of return
Money after-tax rate of return minus the inflation rate.
All equity rate
The discount rate that reflects only the business risks of a project and abstracts from the
The alpha of a fund is determined as follows:
American Stock Exchange (AMEX)
The second-largest stock exchange in the United States. It trades
Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
Annualized holding period return
The annual rate of return that When compounded t times, would have
Arithmetic average (mean) rate of return
Arithmetic mean return.
Also known as a trading index (TRIN)= (number of advancing issues)/ (number of declining
Arm's length price
The price at which a willing buyer and a willing unrelated seller would freely agree to
A dealer's price to sell a security; also called the offer price.
A security that is collateralized by loans, leases, receivables, or installment contracts
A bond indenture restriction that permits additional borrowing on if the ratio of assets to
The ratio of net sales to total assets.
markets in which the prevailing price is determined through the free interaction of
Auction rate preferred stock (ARPS)
Floating rate preferred stock, the dividend on which is adjusted every
Average collection period, or days' receivables
The ratio of accounts receivables to sales, or the total
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.
A strategy in which the maturities of the securities included in the portfolio are concentrated
Gives the lessee the option to purchase the asset at a price below fair market
Base interest rate
Related: Benchmark interest rate.
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
price expressed in terms of yield to maturity or annual rate of return.
Any market in which prices are in a declining trend.
Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will
Beta equation (Mutual Funds)
The beta of a fund is determined as follows:
Beta equation (Stocks)
The beta of a stock is determined as follows:
This is the quoted bid, or the highest price an investor is willing to pay to buy a security. Practically
An illegal market.
Designing a portfolio so that its performance will match the performance of some bond index.
With respect to convertible bonds, the value the security would have if it were not convertible
A company's book value is its total assets minus intangible assets and liabilities, such as debt. A
Book value per share
The ratio of stockholder equity to the average number of common shares. 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
Broker loan rate
Related: Call money rate.
A market where an intermediary offers search services to buyers and sellers.
Any market in which prices are in an upward trend.
The foreign market in the United Kingdom.
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
Buying the index
Purchasing the stocks in the S&P 500 in the same proportion as the index to achieve the
Call money rate
Also called the broker loan rate , the interest rate that banks charge brokers to finance
The price, specified at issuance, at which the issuer of a bond may retire part of the bond at a
The price for which a bond can be repaid before maturity under a call provision.
The market for trading long-term debt instruments (those that mature in more than one year).
Capital market efficiency
Reflects the Relative amount of wealth wasted in making transactions. An efficient
Capital market imperfections view
The view that issuing debt is generally valuable but that the firm's
Capital market line (CML)
The line defined by every combination of the risk-free asset and the market portfolio.
Cash flow coverage ratio
The number of times that financial obligations (for interest, principal payments,
Also called spot markets, these are markets that involve the immediate delivery of a security
An amount the insurance company will pay if the policyholder ends a whole life
Chicago Mercantile Exchange (CME)
A not-for-profit corporation owned by its members. Its primary
Bond price excluding accrued interest.
A strategy in which a put and with the same strike price and expiration are either both
An agreement between two or more countries that permits the free movement of capital
These are securities that represent equity ownership in a company. Common shares let an
Common stock/other equity
value of outstanding common shares at par, plus accumulated retained
Common stock equivalent
A convertible security that is traded like an equity issue because the optioned
Common stock market
The market for trading equities, not including preferred stock.
Common stock ratios
Ratios that are designed to measure the Relative claims of stockholders to earnings
The representing of accounting information over multiple years as percentages
Complete capital market
A market in which there is a distinct marketable security for each and every
The length of the time period (for example, a quarter in the case of quarterly
Conflict between bondholders and stockholders
These two groups may have interests in a corporation that
A firm engaged in two or more unrelated businesses.
A merger involving two or more firms that are in unrelated businesses.
Consumer Price Index (CPI)
The CPI, as it is called, measures the prices of consumer goods and services and is a
Conversion parity price
Related:market conversion price
The contractually specified price per share at which a convertible security can be
Also called parity value, the value of a convertible security if it is converted immediately.
Convertible exchangeable preferred stock
Convertible preferred stock that may be exchanged, at the
Convertible preferred stock
Preferred stock that can be converted into common stock at the option of the holder.
A security that can be converted into common stock at the option of the security holder,
Corner A Market
To purchase enough of the available supply of a commodity or stock in order 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
In bonds, notes or other fixed income securities, the stated percentage rate of interest, usually
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