|Rate of interest|
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Definition of Rate of interest
Rate of interest
The rate, as a proportion of the principal, at which interest is computed.
The interest rate that clears the market. Also called the market-clearing interest
See interest rate, nominal.
See interest rate, real.
Swap in which the principal or national amount rises (falls) as interest rates
Related: Benchmark interest rate.
Also called the base interest rate, it is the minimum interest rate investors will
An annual measure of the time value of money that fully reflects the effects of
interest rate that is annualized using compound interest.
The rate of interest actually earned on an investment. It is
A rate that does not fluctuate with general market conditions.
A rate that fluctuates with general market condition.
interest rate fixed today on a loan to be made at some future date.
Cost of using money, expressed as a rate per period of time, usually one year.
rate charged or paid for the use of money, normally expressed as a percentage
An agreement whereby one party, for an upfront premium, agrees to compensate the
Interest rate cap
Also called an interest rate ceiling, an interest rate agreement in which payments are made
Interest rate ceiling
Related: interest rate cap.
Interest Rate Differential
The interest rate on our financial assets minus the interest rate on a foreign country's financial assets.
Interest rate floor
An interest rate agreement in which payments are made when the reference rate falls
Interest Rate, Nominal
Payment for the use of borrowed funds, measured as a percentage per year of these funds.
Interest rate on debt
The firm's cost of debt capital.
interest rate parity
Theory that forward premium equals interest rate differential.
Interest Rate Parity
Theory that real interest rates are approximately the same across countries except for a risk premium.
Interest rate parity theorem
interest rate differential between two countries is equal to the difference
Interest Rate, Real
Nominal interest rate less expected inflation.
Interest rate risk
The risk that a security's value changes due to a change in interest rates. For example, a
Interest Rate Risk
Possibility that interest rates will rise during the term of a loan thereby increasing the annual cost of borrowing.
Interest rate swap
A binding agreement between counterparties to exchange periodic interest payments on
Nominal interest rate
The interest rate unadjusted for inflation.
Nominal Interest Rate
The rate of interest quoted, or stated, to be paid on a security
nominal interest rate
rate at which money invested grows.
Nominal Interest Rate
The contracted, or stated, interest rate, undeflated for price level changes.
Real interest rate
The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms
Real Interest Rate
The rate of interest paid on an investment adjusted for inflation
real interest rate
rate at which the purchasing power of an investment increases.
Spot interest rate
interest rate fixed today on a loan that is made today. Related: forward interest rates.
Stated annual interest rate
The interest rate expressed as a per annum percentage, by which interest
Term Structure of Interest Rates
Relationship among interest rates on bonds with different terms to maturity.
tiered interest rate
A pre-set scale of interest which is based on the premise that higher sums of money earn higher rates of interest.
Arrangements whereby customers who pay before the final date may be entitled to deduct a
A long-term debt instrument in which the issuer (borrower) is
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 rate of interest used to calculate the present value of a stream
A bond portfolio strategy whose goal is to eliminate the portfolio's risk against a
Contractual debt payments based on the coupon rate of interest and the principal amount.
Internal rate of return
a. The average annual yield earned by an investment during the period held.
The London Interbank Offered rate; the rate of interest that major international banks in London
Total demand for loans by borrowers equals total supply of loans from lenders. The market,
The loss of cash resulting from a swap into higher price bonds or the need/willingness of a bank or
present value (PV)
the amount that one or more future cash
The rate of interest that Canadian financial institutions charge on Canadian dollar loans to certain customers. It is based on the rate established by the Bank of Canada. Typically, all financial institutions have the same prime rate.
The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest
Accelerated cost recovery system (ACRS)
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
Accounting rate of return (ARR)
A method of investment appraisal that measures
accounting rate of return (ARR)
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
The accumulated coupon interest earned but not yet paid to the seller of a bond by the
The amount of interest accumulated on a debt security between
The amount of interest owing but not paid.
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.
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
Annual percentage rate (APR)
The periodic rate times the number of periods in a year. For example, a 5%
annual percentage rate (APR)
interest rate that is annualized using simple interest.
Arithmetic average (mean) rate of return
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
Basic business strategies
Key strategies a firm intends to pursue in carrying out its business plan.
The requirement that a claim holder voting against a plan of reorganization
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
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
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.
interest that is not immediately expensed, but rather is considered as an asset and is then
interest incurred during the construction period on monies invested in
cash burn rate
A relatively recent term that refers to how fast a business
Cash flow after interest and taxes
Net income plus depreciation.
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
interest paid on previously earned interest as well as on the principal.
interest paid on principal and on interest earned in previous
a method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest
interest earned on interest.
interest earned on an investment at periodic intervals and added to principal and previous interest earned. Each time new interest earned is calculated it is on a combined total of principal and previous interest earned. Essentially, interest is paid on top of interest.
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.
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