Time value of money. Behavior of interest rates

Across

3. An investment's annual income (interest or dividends) divided by the current price of the security
6. The lending interest rate adjusted for inflation as measured by the GDP deflator
11. The possibility that an investor might be unable to reinvest cash flows at a rate comparable to their current rate of return
13. is a company that assigns credit ratings, which rate a debtor's ability to pay back debt by making timely principal and interest payments and the likelihood of default
14. is an interest rate applicable to a financial transaction that will take place in the future
18. shows that long-term U.S. Treasury debt interest rates are less than short-term interest rates
19. Bonds in which payment of income on the principal is related to a specific price index, usually the Consumer Price Index
20. Is a security that is issued for less than its par or face value
22. theory states that the interest rate on a long-term bond will equal an average of short-term interest rates expected to occur over the life of the long-term bond plus a liquidity premium (also referred to as a term premium) that responds to supply-and-demand conditions for that bond
23. Is a type of loan where the interest rate remains unchanged for the entire term of the loan or for a part of the loan term
25. The percentage increase in the value of an asset or investment over a specific period of time. It is calculated by taking the difference between the final and initial value of the asset, divided by the initial value, and then multiplying by 100
28. The probability of a decline in the value of an asset resulting from unexpected fluctuations in interest rates
29. is the failure to make required interest or principal repayments on a debt, whether that debt is a loan or a security
31. bonds with no default risk
32. explains why bonds of the same maturity but issued by different economic entities have different yields

Down

1. Is a financial term used to describe a security’s nominal or dollar value as given by its issuer. For bonds, it’s the amount paid to the holder at maturity
2. maps out the relationship between interest rates and the time to maturity for a given debt instrument, typically government bonds
3. A debt obligation with coupons attached that represent semiannual interest payments
4. states that current long-term rates can be used to predict short term rates of future
5. is the annualized return on a debt instrument based on the total payments received from the date of initial purchase until the maturation date
7. Measures how long it takes, in years, for an investor to be repaid a bond’s price through its total cash flows
8. Is the current value of a future sum of money or stream of cash flows
9. The movement of money into and out of a company over a certain period of time
10. theory sees markets for different-maturity bonds as separate and segmented
12. is the net gain or loss of an investment over a specified time period, expressed as a percentage of the investment’s initial cost
15. Is a percentage that describes how much is paid by a fixed-income security to the owner of that security during the duration of that bond
16. bonds that carry a higher risk of default than most bonds issued by corporations and governments
17. is the investment return an asset is expected to yield in excess of the risk-free rate of return
21. Is the annual rate you find on financial products, not adjusted for inflation, fees, or compounding
24. is the price quoted for immediate settlement on an interest rate, commodity, a security, or a currency
26. a line that plots the yields or interest rates of bonds that have equal credit quality but different maturity dates
27. Is an investment asset that pays a stated return for an infinite amount of time. An annuity with no termination date is an example of it
30. Values that have been adjusted for inflation, providing a more accurate representation of the purchasing power of money over time