Finanzas

Repaso FINA 3006 Examen Final
Interest rate - compensation paid to the borrower of the funds to the lender.
Required return – cost of funds obtained by selling an ownership interest.
Liquiditypreferences – general preferences of investors for shorter term securities.
Real rateof interest – rate that creates equilibrium between supply of savings and demands in a world with no inflation.
Riskfree rate of interest – the required return on a risk free asset.
Term structure of interest rates – relationship between interest rate or rate of return and maturity time.
Yield to maturity –compound annual rate of return earned on a debt and held to maturity.
Yield curve – shows yield to maturity for debts of equal quality and different maturities.
Inverted yield curve – indicates cheaperlong term borrowing cost.
Normal yield curve – indicates cheaper short term borrowing cost.
Flat yield curve – reflects similar borrowing cost for short and long term loans.
Expectations theory –theory that yield curve reflects investor expectations about future interest rates and inflation.
Liquidity preference theory – suggest that long term interest rates are higher than short term rates.Market segmentation theory – suggests that the market for loans is segmentated on the basis of maturity and the supply and demand of loans determine its interest rate.
Risk repremium – amount bywhich interest rate exceeds the risk free rate of interest.
Default risk – possibility issuer of debt wont pay the contractual interest or principal as scheduled.
Maturity risk – the longer thematurity the more changes the value of security.
Contractual provision risk – conditions included in a debt agreement or stock issue.
Corporate bond – long term debt instrument, indicates that corporationborrowed money but will pay.
Coupon interest rate – percentage of a bonds par value that will be paid annually (2 payments).
Bond indenture – legal document that specifies: rights of the bond...