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Monetary EC Study Sheet

Monetary EC Study Sheet - Adjustable Rate Mortgages...

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Adjustable Rate Mortgages: interest rate is tied to a market interest rate – can change over time, but usually have limits/caps Adverse Selection: hidden info – those who seek loans most, are usually riskiest (b4 trans) Agency Bonds: bonds issued by US agencies – higher rates than treasury, but low risk (less liquid) American Depository Receipts: receipt for foreign stocks held by a trustee – receipts trade on US stock exchanges instead of actual stock American Option: can exercise at any time – EU only at exercise date AMEX: American Stock Exchange Amortized: paid off in stages over period of time – each payment = some interest + principal Asset: financial claim/piece of property that is a store of value Banker’s Acceptance: used in international trade – short term promissory note by company to pay for goods – bank guarantees payment at maturity Best Efforts: alt to underwrite – bank doesn’t purchase, but sells at best effort for commission Board of Gov: 7 members in DC, 14 yr terms & all decision making actives – sit on FOMC Bond Indenture: gives bond details, lenders right/privs and borrower obligations Bretton Woods: system of fixed rates IMF was to help maintain Call Option: option to buy (going long) Call Provisions: issuer can repurchase bond at any time Cash Flows: dif b/t cash receipts & expenditures Central Bank: oversees banking, money supply, & policy Closed End Fund: doesn’t take new money Commercial Paper: unsecured promissory notes issued by corporations that mature < 270 days – rates reflect firm risk Common Stock: security giving ownership interest in firm – right to vote and residual cash flows Credit Risk: risk of default – prevent with screening, monitoring, long term cust relations, loan commitments, collateral, compensating balances, & credit rationing Current Yield: approx of YTM – coupon payment divided by price of coupon bond Devaluation: country forced to devalue Discount Lending:
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