Question

Please read through this unit's list of terms and concepts provided in the Key Terms module of this unit. You should look for these terms as you read the assigned textbook chapters. The terms and concepts are important for understanding the material. Do not look at each word as a separate entity that stands alone. Try to understand it in the context of the chapters' content. You should write out your own definitions for each term.

For this unit, please submit five of these term definitions for grading. A few words of caution: writing out the definitions is an important exercise, even the ones you don't have to submit. For this assignment do not simply copy a one-sentence definition of the term. Instead, provide a definition which relates to context and/or examples to best demonstrate your understanding.

Money markets Negotiable CD
Bond equivalent yield
Discount yield
Opportunity cost
Liquidity
Treasury Bills
LIBOR
Default risk free
Banker's acceptance
Repo and reverse repurchase agreement
Eurodollar deposits
Term vs serial bonds
Mortgage bonds
Convertible and callable bonds
Call premium
Second mortgages
Lien
Syndicate
Originating house
Preemptive rights
Red herring proxy
Secondary stock markets
Net long (short) in a currency
Open position
Safe haven
Purchasing power parity
Interest rate parity theorem (IRPT)
Open interest
Option
American option
European option
Call option
Put option
Intrinsic value of an option
Time value of an option
Foreign exchange rates
Dollarization
Foreign exchange risk
Currency appreciation
Derivative security
Derivative security markets
Spot contract
Forward contract
Futures contract
Marked to market
Initial margin
Maintenance margin
Floor broker

Answer 1

1) Money Market NCD :A certificate of deposit (CD) is a time deposit with a bank. CDs are generally issued directly by commercial banks, but they can be purchased via brokerage firms. CDs have a specific maturity date (from three months to five years), a stated interest rate, and can be issued in any denomination, much like bonds. Most CDs assess a penalty for early withdrawal prior to the CD’s date of maturity.

2) Bond Equivalent Yield : The bond equivalent yield (BEY) allows fixed-income securities whose payments are not annual to be compared with securities with annual yields. The BEY is a calculation for restating semi-annual, quarterly or monthly discount bond or note yields into an annual yield, and is the yield quoted in newspapers. Alternatively, if the semi-annual or quarterly yield to maturity of a bond is known, the annual percentage rate (APR) calculation may be used.

3) Discount Yield :Discount yield is a measure of a bond's rate of return to an investor, stated as a percentage, and discount yield is used to calculate the yield on municipal notes, commercial paper and treasury bills sold at a discount. Discount yield is calculated as (par value - purchase price)[/par value] * 360/days to maturity, and the formula uses a 30-day month and 360-day year to simplify the calculation.

4) Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. While financial reports do not show opportunity cost, business owners can use it to make educated decisions when they have multiple options before them.Because by definition they are unseen, opportunity costs can be easily overlooked if one is not careful. Understanding the potential missed opportunities foregone by choosing one investment over another allows for better decision-making.

5) Liquidity :Liquidity describes the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price.Market liquidity refers to the extent to which a market, such as a country's stock market or a city's real estate market, allows assets to be bought and sold at stable prices. Cash is considered the most liquid asset, while real estate, fine art and collectibles are all relatively illiquid. Accounting liquidity measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them. There are several ratios that express accounting liquidity highlighted below.