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Issued Shares Definition & Example | InvestingAnswers

Issued shares are included in the calculation of market capitalization (issued shares multiplied by current share price) and earnings per share (EPS calculated as issued shares divided by earnings), two major measures of a company's value and performance used by investors.


Discount Rate Definition & Example | InvestingAnswers

The discount rate, also known as the Fed discount rate, is the interest rate charged to commercial banks and other institutions on loans from a Federal Reserve bank. This process is a key tool of Federal Reserve monetary policy and an integral part of the Federal Reserve's role in the broader financial system.


ETF Education Corner: Real World Examples Of Tender Offers

Under each tender offer program, if a fund's common stock trades at an average daily discount to net asset value (NAV) of greater than 10% during a 12-week measurement period, the fund will conduct a tender offer for between 5% and 20% of its outstanding common stock at a price equal to 98% of its NAV determined on the day the tender offer ...


Key Rate Duration Definition & Example

Key rate duration is not the same as effective duration. Effective duration is an estimate of a security's sensitivity to a parallel shift in interest rates, meaning that it assumes that interest rates change by the same degree for, say, one-year bonds, five-year bonds, 10-year bonds, and 30-year bonds.


Negative Convexity Definition & Example

Callable bonds can also exhibit negative convexity at certain prices and yields. This is because an issuer 's incentive to call a bond at par increases as interest rates decrease. In fact, the price might actually drop as it becomes more obvious that the bond will be called.


Personal Income Definition & Example

Personal income, aka "before-tax income, " is the total annual gross earnings of an individual from all income sources, such as: salaries and wages, investment interest and dividends, employer contributions to pension plans, and rental properties. How Personal Income Works


Best Efforts Definition & Example | InvestingAnswers

Best efforts is a legal agreement between a securities underwriter (usually an investment bank) and a securities issuer, whereby the underwriter agrees to do the best it can to sell as many of the issuer's securities as possible to the public.


Warrant Premium Definition & Example

Warrants tend to trade above their minimum value. For example, consider a warrant to purchase 100 shares of Company XYZ for $20 per share anytime in the next five years. If Company XYZ shares rose to $100 during that time, the warrant holder could purchase the shares for $20 each and immediately sell them for $100 on the open market, pocketing a profit of ($100 - $20) x 100 shares = $8,000.


Ex-Dividend Date Definition & Example

The ex-dividend date is normally two business days before the record date. If you purchase a stock on or after its ex-dividend date, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you will get the dividend. Here is an example:


Bonds | InvestingAnswers

Principal-only STRIPS are synthetic zero-coupon bonds that are based on the principal component of Treasury See More. Private-Purpose Bond A private-purpose bond is a municipal bond that uses a significant amount of its proceeds to See More.


Discount Window Definition & Example - Investing Answers

The discount window is the method that banks use to borrow money from a central bank on a short-term basis, named after an actual teller window at the Federal Reserve where such transactions used to be carried out. The discount window is used only in financial emergencies, such as major stock market collapses or liquidity crises.


Hurdle Rate Definition & Example | InvestingAnswers

A hurdle rate is the "line in the sand" that helps companies decide whether to pursue projects. Companies often use internal rate of return (IRR) to determine whether an investment exceeds a company's hurdle rate. Regardless of the calculation method, it is important to note that judging a project based on percentage returns can be dangerous. Hurdle rates can favor investments with high rates ...


Wealth Management Definition & Example

Wealth management combines both financial planning and specialized financial services, including personal retail banking services, estate planning, legal and tax advice, and investment management services. The goal of wealth management is to sustain and grow long-term wealth.The net worth needed to qualify for wealth management services vary among a€


NAV -- Premium To Net Asset Value -- Definition & Example

Premium to NAV (and "discount to NAV ") is most often used to describe the price per share of closed-end stock funds. Closed-end funds are similar to open-end funds (commonly known as " mutual funds ") except for a few key differences.


Broker Definition & Example | InvestingAnswers

For example, a commodities broker specializes in trading commodities, a floor broker handles orders on the floor of a stock or commodities exchange and a full-service broker offers brokerage services and sells other financial products such as insurance, tax planning or research conducted by other members of the brokerage firm. A discount broker ...


Brokerage Fee Definition & Example | InvestingAnswers

The brokerage fee you pay is often dictated by the type of broker you use. Full-service brokers provide a lot of services -- research reports, advice and even tax help. Their clients usually pay high fees in return for these services. Discount brokers, on the other hand, usually focus on executing trades and do little else. Their clients often ...


Markdown Definition & Example | InvestingAnswers

Markdown refers to the negative spread between the price a broker charges a client for a security and the highest price at which that security is sold between brokers. It a€


IRR -- Internal Rate Of Return -- Definition & Example

Internal rate of return (IRR) is the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equal zero. Internal rate of return is used to evaluate the attractiveness of a project or investment. If the IRR of a new project exceeds a company's required rate of return, that ...


Bps -- Basis Points -- Definition & Example

The term basis points avoids the ambiguity in discussions about rates. Confusion could arise in a statement such as, "a 1% increase from a 10% interest rate." The 1% increase could be interpretted as either an increase from 10% to 10.1% (relative) or 10% to 11% (absolute). Using basis points clarifies the amount in question.


STRIPS Definition & Example | InvestingAnswers

Essentially, STRIPS are created when a financial institution buys a T-Note or T-Bond and then turns each interest and principal payment into a separate security (i.e., it "strips" the interest and principal payments). These new securities are sold as zero-coupon bonds with maturities that correspond to the timing of each particular interest ...


Treasury Bill (T-bill) Definition & Example

T-Bills are issued at a discount to the maturity value. Rather than paying a coupon rate of interest, the appreciation between issuance price and maturity price provides the investment return.. For example, a 26-week T-bill is priced at $9,800 on issuance to pay $10,000 in six months.


Corporate Bond Definition & Example | InvestingAnswers

The interest rate, or coupon rate, on a bond is the percentage of par, or face value, that the issuer pays the bondholder on an annual basis. For example, you purchase a 5% bond (that is, a bond with a 5% coupon rate) from Company XYZ. The bond has a face value of $1,000.


Effective Duration Definition & Example

In contrast, a bond with a coupon rate lower than the prevailing market yield is not likely to be called and will thus have an effective duration similar to a noncallable bond. In turn, the greater duration of the bond, the greater its percentage price volatility.


FCF -- Definition & Example | InvestingAnswers

Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes. Free Cash Flow Formula and Example.


ELKS -- Equity-Linked Securities -- Definition & Example

As the name implies, equity-linked securities (ELKS) are hybrid debt securities whose return is connected to an underlying equity (usually a stock). ELKS pay a higher yield than the underlying security and generally mature in one year.


Face Value Definition & Example | InvestingAnswers

Face value is a crucial component of many bond and preferred stock calculations -- including interest payments, market values, discounts, premiums, and yields. As shown in the example above, the interest on a bond is usually calculated as a percentage of face value.


Installment Loan Definition & Example

Installment loans are great for businesses and individuals who lack the cash to purchase a big ticket item or service. They are a convenient way to pay for buildings, houses, cars, or even college tuition in manageable, periodic installments. The structure of the loan also provides assurance to the lender that his or her loan will be repaid.. Upon taking an installment loan, a borrower's ...


Bullet Loan Definition & Example | InvestingAnswers

Unlike a loan whose total cost (interest and principal) is amortized -- paid incrementally during the life of the loan -- a bullet loan's principal is paid in one sum at the end of the term.Sometimes the interest is collected as part of the bullet payment as well, though in many cases the loan is interest-only during the term of the loan with only the outstanding principal due at the end.


Market Discount Definition & Example

In the secondary bond market, bond prices move inversely to interest rates. That is, an increase in interest rates will cause the value of outstanding bonds to decline. The reason for this is that new bonds now have higher coupon payments, and existing bonds have a€


Accrued Market Discount Definition & Example

The accrued market discount is a discount bond 's increase in value resulting from the approach of its maturity date rather than a drop in interest rates. This occurs because the holder will receive the par value in full upon maturity, regardless of the amount by which a bond was discounted at the time of purchase.


Federal Funds Rate Definition & Example

Although the Federal Reserve cannot set the federal funds rate, it can manipulate it indirectly. This is primarily done by changing the "discount rate," which is set directly by the Federal Reserve. If the discount rate is lower than the federal funds rate, banks will probably prefer to borrow from the Federal Reserve when they need loans.


How To Calculate Present Value Using Excel Or A Financial ...

Present value is one of the most important concepts in finance. Luckily, once you learn a few tricks, you can calculate it easily. All you need to do is use Microsoft Excel or a financial calculator. But we do understand that it can be a little daunting if you've never done it a€

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