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Glossary of Financial Terms — E 






Earnings Yield

The percentage found by dividing the earnings per share by the market price of a stock.


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An offering is said to be effective once the SEC has released the issue for offering.


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Effective Yield

The rate of return realized by an investor who buys a security and subsequently sells it. It reflects coupon, interest on interest, principal payments and capital gains or losses in comparison to the original purchase price.


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Employees Retirement Income Security Act

A law enacted in 1974 covering private pension plans, setting standards for fiduciary conduct and making fiduciaries personally liable for breaches of responsibility.


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Equipment Trust Certificate

Form of borrowing secured by property, generally issued by railroads, to pay for new equipment. Title to the equipment is held in trust until the notes are paid off. It is usually secured by a first claim on the equipment.


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Ownership or proprietary rights and interests in a company. Synonymous with common stock. Investments: ownership interest possessed by shareholders in a corporation—stock as opposed to bonds.


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Equivalent Bond Yield

A measurement of the rate of return on a security sold on a discount basis that assumes actual days to maturity and a 365-day year.


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Equivalent Life

The arithmetic weighted average maturity of a bond where the weights are the present value of the redemption payments discounted by the internal rate of return.


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A bond denominated in a currency of a European country.


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An international clearing system for Euro-currency and foreign securities. Euroclear is based in Brussels and managed by Morgan Guaranty Trust Company.


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Created when a banking office in one country accepts a deposit ( or other evidence of debt) denominated in the currency of another. When the deposit is denominated in U.S. dollars, it is a Eurodollar deposit. In addition to bank deposits, Eurocurrency instruments may take the form of bankers’ acceptances, letters of credit, certificates of deposit and loans of various maturities. Hence the terms Eurodollar CD, Eurodollar Bond, etc.


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Eurodollar Issues

Dollar denomination securities of U.S. issuers traded in foreign markets.


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European Central Bank

The European Central Bank (ECB) is the central bank responsible for monetary policy covering the member countries of the Eurozone.


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European Style Option

An option that may be exercised only during a brief period of time just prior to its expiration date.


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The Eurozone (also called Euro Area, Eurosystem or Euroland) is the subset of European Union member states which have adopted the euro, creating a currency union. The European Central Bank is responsible for monetary policy within the zone. Eurozone currently consists of thirteen member states: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Slovenia, Spain.


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Even Par Swap

The sale of one block of bonds and the simultaneous purchase of the same principal amount of another block of bonds.


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Functions, Processes, Activities and Tasks.


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Excess Reserves

Any excess of bank balances at the Fed above the amount required as reserves.


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1. Any place where business is carried on by brokers. Generally refers to one of the major stock exchanges, those being the New York Stock Exchange (NYSE) and the American Stock Exchange (ASE). Other exchanges include the Philadelphia-Baltimore-Washington (PBW), Boston, Cincinnati, Detroit, Midwest, Chicago Board of Options Exchange (CBOE) and the Pacific Exchange. 2. The money or currency of a country. 3. A physical facility for futures order execution, market making, trade reporting, trade clearing, and market surveillance. 4. A self-regulating body to assure fair and orderly trading designated by the CFTC.


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Exchange Rate

The relative value of one currency in terms of another.


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Exchange-Traded Funds

Similar to a regular index fund, an exchange-traded fund (ETF) owns a basket of stocks that mirrors the composition of a market index, such as the Dow Jones Industrial Average or the Standard & Poor’s 500. ETF shares are purchased in the same way that stock is purchased: not from a fund company, but on a stock exchange, with the help of a broker who charges a commission.


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Ex-Dividend Coupon Date

The date from which the seller of a security, rather than the buyer, will be entitled to receive the annual or interim dividend coupon payment.


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Instruments exempt from registration requirements of the Securities Act of 1933 and the margin requirements of the Securities and Exchange Act of 1934. Exempt securities include debt of the U.S. Treasury, U.S. Government agencies and municipalities, private placements, commercial paper, Title XI, and equipment trust certificates.


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In the pass-through market, refers to a rate of prepayments, usually measured in terms of some “norm.” For example, “200 % FHA-experience” means prepayments at twice the rate predicted by the FHA model.


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Extendible Bond (or Retractable)

A bond with a call provision that gives the issuer the option to extend the maturity date ( if the call is not exercised) and reset the coupon at any rate. The investor then may choose to put the bond at the call price or accept the new coupon.


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Information contained herein is believed to be reliable, but the accuracy and completeness of this material cannot be guaranteed.


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