Capital Market

• It is the risk that earnings from a financial asset need to be reinvested in lower yielding assets or investment because interest rates have fallen or decreased.

  Reinvestment risk
• Refers to all fees, commissions, and other charges paid when buying or selling securities including research costs, cost of distributing securities to investors, cost of SEC registration, and the time and hassle of the financial transaction.

  Transaction cost
• Refers to yields or earnings on an investment.

  Returns
• It is also called undiversified risk or market risk. Results from the general

  market and economic conditions that cannot be diversified away.

  Systematic risk
• risk is an average affect by assuming the combined effect of each possible consequence weighted by the associated likelihood of each consequence.

  BS 25999
• It refers to the maturity value of an investment.

  Terminal value
• It is calculated as the square root of variance.

  Standard deviation
• It means short term rates are higher than long-term rates which can

  happen under certain market conditions.

  Downward sloping
• It is the total opposite of the pure expectations theory where securities with different maturities are perfect substitute for each other.

  Segmented markets theory
• It combines the elements of the three other theories of term structure.

  Preferred habitat theory
• Interest rates denotes percentage earnings or yield on investment. It is the cost of using money expressed as percentage of the principal for a given period of time, which is usually per year.

  Concept of interest rate
• This is a type of demand where they hold on to money with the intention of using it when an opportunity to earn more arises.

  Speculative demand
• It is a type of demand where people tend to hold on to money to pay for their day to day expenses.

  Transaction demand
• It means that the interest you are charged changes as whatever index your loan is bases on changes.

  Variable interest rate
• It is a type of interest rate where it is real rate that the lender or investor receives, or a borrower pays after considering inflation. Interest rate is adjusted for expected changes in the price level to accurately reflect the true cost of borrowings.

  Real interest rate
• It is a type of risk where possible loss resulting from an unfavorable change in the value of foreign currencies.

  Currency or foreign exchange risk
• It is the future cash flows associated with investment.

  Expected return
• It is the ratio of the net cash flows and the principal of initial investment.

  Rate of return
• It is interest rate that you will be charged over the term of your loan will not change, no matter how high or how low the market may drive interest rates.

  Fixed interest rate