A security that is issued with a variable or floating interest rate, but that converts to a fixed-rate security if its reference rate reaches or falls below a predetermined level. The conversion from a floating-rate to a fixed-rate security can be viewed as an embedded option for a cap and a floor on the fixed income security. Usually, these features are used to protect borrowers from high interest rates. |||In the U.K., the term "droplock mortgage" refers to variable interest rate mortgages that can be converted to a fixed rate by the borrower without incurring a penalty or paying additional fees. Droplock mortgages are attractive when interest rates are perceived to be heading higher.
1. A significant but non-controlling ownership of less than 50% of a company's voting shares by either an investor or another company. 2. A non-current liability that can be found on a parent company's balance sheet that represents the proportion of its subsidiaries owned by minority shareholders. Taobiz explains Minority Interest 1. In accounting terms, if a company owns a minority interest in another company but only has a minority passive position (i.e. it is unable to exert influence), then all that is recorded from this investment are the dividends received from the minority interest. If the company has a minority active position (i.e. it is able to exert influence), then both dividends and a percent of income are recorded on the company's books. 2. If ABC Corp. owns 90% of XYZ inc, which is a $100 million company, on ABC Corp.'s balance sheet, there would be a $10 million liability in minority interest account to represent the 10% of XYZ Inc. that ABC Corp does not own.
The practice of accounting for the discount at which a bond is sold as an interest expense to be amortized over the life of the bond. Using this method, additional interest expense is calculated using the prevailing market interest rate at the time of the bond issue. The market rate is multiplied by the book value of the bond to find the amount of the discount to be amortized as interest expense each period. |||The effective interest method is regarded as one of the preferred methods for amortizing a bond discount. In theory, investors demand a discount on bonds because the market interest rate at the time of issue exceeds the coupon payments on the bond. Thus, by amortizing the discount at the market interest rate, a company’s accounting statements more closely reflect the economic reality of the bond issue and the firm’s true cost of debt.
A type of third-party offer made to a company's shareholders as an attempt to purchase the underlying shares. Unlike conventional tenders, mini-tenders usually involve less than 5% of a company's outstanding shares and typically represent a discount compared to the stock's current market price. Taobiz explains Mini-Tender Mini-tenders typically are frowned upon by the investment community because many of the procedures and regulations associated with tenders do not apply to them. Shareholders who are approached with a mini-tender should be extremely diligent in evaluating the offer, as the terms of the mini-tender may not necessarily be beneficial to the investor. For example, mini-tenders are not required to file any documentation with the SEC (such as the offer and information about the offering company), which makes disclosure an issue. Furthermore, most mini-tenders do not allow shareholders the right to withdraw from the mini-tender after initially agreeing to do so.
Italy's primary securities market, the Milan Stock Exchange (in Italian, Borsa Italiana) traces its origins to the 1808 establishment of Milan's Borsa di Commercio (commodities exchange). The first company share was listed in 1859, and banking and railway companies joined the exchange in the 1870s. Electronic trading became fully operational in 1994, and the Exchange became privatized in 1998. Taobiz explains Milan Stock Exchange (MIL) .MI In 2007, the Milan Stock Exchange merged with the London Stock Exchange to create one of the largest exchange groups in Europe, comparable in the number of listed companies (around 3,400 in 2008) to the BME Spanish Exchanges. Its main indexes are the capitalization-weighted S&P/MIB, which includes the index's 40 biggest companies over 10 sectors, and the MIBTEL.
A type of credit enhancement used in certain asset backed securities (ABS). Early amortization is an accelerated payment of bond principal in an asset-backed security, usually triggered when there is a sudden increase in delinquencies in the underlying loans or when excess spread, the issuer's net profit after deducting servicing fees, charge-offs and other costs, falls below an acceptable level. Also called a payout event. |||Early amortization signals liquidity crisis for the originator, as funding dries up. The early payout protects investors from prolonged exposure to receivables with deteriorated credit performance. However, the investor is relying on the fixed income from the ABS - prepayment is an inherent risk for investors.
A description of the shares of a company with a medium (or mid-sized) market capitalization that are trading below the stock's intrinsic value. Taobiz explains Mid-Value Stock Value investors typically seek out companies that are trading at a low price, as compared to common valuation metrics such as the P/E ratio and the price-to-book value ratio. When a stock has been identified as a value stock and its market capitalization puts it in the mid-cap range of the market, it is often referred to as a mid-value stock by investors.
A slang term used to describe a pool of mortgage backed securities (MBSs) that have been issued by Fannie Mae and have a maturity of 15 years. |||Fannie Mae is short for the Federal National Mortgage Association. It is one of the governing bodies that are able to issue MBS that are guaranteed by the U.S. government or by an independent governing body in the secondary market. The other official bodies are Freddie Mac and Ginnie Mae. Ginnie Mae has the authority to guarantee MBS issues from qualified private lenders which meet a set of stringent criteria.
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