A financial specialist involved as an intermediary in the merchandising of securities; facilitates flow of savings from economic units that want to invest in those units that want to raise funds.
Shelf Registration or Shelf Offering is a procedure for issuing new securities where the firm obtains a master registration statement approved by the SEC
Sarbanes-Oxley Act of 2002
In July 2002, Congress passed the Public Accounting and Reform and Investor Protection Act
The Act contains 11 titles which tighten significantly the latitude given corporate advisors who have access to or influence company decisions.
Opportunity Cost— Rate of return on next best investment alternative to the investor
Standard Deviation— Dispersion or variability around the mean, or average of the rate of return in the financial markets
Maturity Premium— Additional return required by investors in long-term securities to compensate them for greater risk of price fluctuations on those securities caused by interest rate changes
Liquidity Premium— Additional return required by investors in securities that cannot be quickly converted into cash at a reasonably predictable price.
Liquidity Premium— Additional return required by investors in securities that cannot be quickly converted into cash at a reasonably predictable price.
Real Return— Return earned above the rate of increase in the general price level for goods and services in the economy (the inflation rate)
Real Rate of Interest— Rate of increase in actual purchasing power—after adjusting for inflation
Rates of Return in Financial Markets
Interest Rate Determinants in a Nutshell
k = k* + IRP + DRP + MP + LP
where:
k = nominal or observed rate of interest on a specific fixed-income security
k* = real risk-free rate of interest on a fixed-income security that has no risk and in an economic environment of zero inflation. (US Treasury Securities)
