vocab 2

Discount Bond

A bond sold for less than its face value and repaid in full at maturity. It does not make periodic interest payments.

Current Yield

A quick estimate of a bond’s return, calculated by dividing its annual interest payment by its current price.

Interest-Rate Risk

The chance that changes in interest rates will reduce investment returns.

Real Interest Rate

The interest rate adjusted for inflation, showing the actual cost of borrowing.

Rate of Return

The total earnings from an investment, including interest and changes in value, relative to its purchase price.

Present Value

The worth today of a future payment, adjusted for interest rates.

Liquidity

How easily and quickly an asset can be turned into cash.

Expected Return

The predicted profit or gain from an investment over a certain period.

Market Equilibrium

A balance where the amount buyers want to buy equals the amount sellers want to sell.

Demand Curve

A graph showing how price affects the quantity of a good that people want to buy, assuming other factors stay the same.