AP Financial

Put-call parity relationship
The relationship between the price of a put and the price of a call on the same underlying security with the same expiration date, which prevents arbitrage opportunities. Holding the underlying stock and buying a put will deliver the exact payoff as buying one call and investing the present value (PV) of the exercise price. The call value equals C = S + P - PV(k).

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Completion risk
The risk that a project will not be brought into operation successfully or be able to pass its completion test.

APFinancial growth rate

APFinancial investment products: Residential property
Property that consists of homes, apartments, townhouses, and condominiums.
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Put ratio backspread
A complex options strategy adopted when one believes a stock price will decline but wants to protect against it rising.

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AP Financial Finance: Real Currency
The purchasing power in today's currency of future nominal currency to be disbursed or received.

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Purchase-money mortgage
A mortgage given by a buyer in lieu of cash when the buyer is unable to borrow commercially for the purchase of property.

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There is an issue as to whether you want to define the FCFs to the firm as a whole (the cash flow to all of its security holders), or the FCFs only to the firm's equity holders. For firm valuation, you want the former; for stock valuation you want the latter.
To value the firm, calculate the stream of FCFs to the firm and discount this stream by the firm's WACC (Weighted average cost of capital). This will give you the value of a levered firm, including the tax benefits of debt financing. Alternatively, you can discount the firm's FCFs by its unlevered cost of capital and add separately the present value of the tax benefits.
To value the firm's equity, you can either take the above number and subtract the market value of all outstandingdebt (liabilities) or you can calculate the FCFs to the firm's equity holders and discount this stream by the firm's levered equity cost of capital.
Notice that changes in working capital have the same effect on free cash flows as do changes in physical capital, i.e., capital expenditures. For example, suppose you had to spend $XX to increase the capacity of your plant. This expenditure would be a reduction in free cash flow in the year it was made. Likewise, if you had to increase the level of your cash balance, inventory or receivables by $XX to accommodate greater sales, then this too would result in a like reduction in free cash flows in the year the level of working capital was increased. [Definition and discussion courtesy of Professor Michael Bradley.]

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Kuala Lumpur Stock Exchange (KLSE)
Established in 1973, the Kuala Lumpur Stock Exchange (KLSE) is the only stock exchange in Malaysia.

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AP Financial Market Summary: Current order
In the context of periodic repayment schedules, the next periodic principal repayment.
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APFinancial traditional bank instruments
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Open-market operation
Purchase or sale of government securities by the monetary authorities to increase or decrease the domestic money supply.

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AP Financial Finance: Working control
Control of a corporation by a shareholder or shareholders having less than 51% voting interest because of the wide dispersion of share ownership.

APFinancial Asociates

Profit margin
Indicator of profitability. The ratio of earnings available to stockholders to net sales. Determined by dividing net income by revenue for the same 12-month period. Result is shown as a percentage. Also known as net profit margin.

APFinancial Investments

Closed-end mortgage
Mortgage against which no additional debt may be issued.

AP Financial Credits

Interim financing
A short-termloan made to a company on the condition that a takeout will follow with long-term or intermediate financing.

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APFinancial Investment: Risk-adjusted profitability
A probability used to determine a "sure" expected value (sometimes called a certainty equivalent) that would be equivalent to the actual riskyexpected value.
APFinancial Personal
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AP Financial high interest

Spike
Order ticket that shows the stock, price, number of shares, type, and account of the order. Origin: Practice of placing the ticket on a metal spike upon execution or cancellation. Spike is also a sudden, drastic increase in a company's share price.

APFinancial Representatives
AP Financial Finance: Letter of Guarantee
A letter from a bank to a brokerage firm which states that a customer (who has written a call option) does indeed own the underlying stock and the bank will guaranteedelivery if the call is assigned. Thus the call can be considered covered. Not all brokerage firms accept letters of guarantee. Also: letter issued to Option Clearing Corporation by member firms covering a guarantee of any trades made by one of its customers, (a trader or broker on the exchange floor).

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Gross lease
A type of property lease in which the lessor (owner of the property being leased) pays expenses associated with ownership such as damages, taxes, and insurance.

AP Financial Coproration

Cloud on title
Any claim or encumbrance, usually discovered in a title search, that may impair the title to a property, and make its validity questionable. See: bad title.

AP Financial higher rate of return

Unfunded debt
Debt maturing within one year (short-term debt). See: Funded debt.

AP Financial Market Summary

APFinancial Insurance: Central bank
A country's main bank whose responsibilities include the issue of currency, the administration of monetary policy, open market operations, and engaging in transactions designed to facilitate healthy business interactions. See: Federal Reserve System.
APFinancial Careers
APFinancial Comprehensive Proposals
APFinancial Work places

Efficient market
Market in which prices correctly reflect all relevant information.

AP Financial Capital
AP Financial Finance: Foreign exchange
Currency of another country. Abbreviated Forex.

AP Financial Business

Resistance level
A price level above which it is supposedly difficult for a security or market to rise. Price ceiling at which technical analysts note persistent selling of a commodity or security. Antithesis of support level.

APFinancial mutual funds

Back taxes
Due taxes that have not been paid on time.

APFinancial Interests

Conversion Period
The time period during which an investor can exchange a convertible security for common stock.

APFinancial investment products

APFinancial growth rate: Exposure netting
Offsetting exposures in one currency with exposures in the same or another currency, when exchange rates are expected to move in such a way that losses or gains on the first exposed position should be offset by gains or losses on the second currency exposure.
AP Financial nationwide leader
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Abandonment
Controlling party giving up rights to property voluntarily.

AP Financial Finance
APFinancial Careers: Risk-reward ratio
Relationship of substantial reward corresponding to the amount of risk taken; mathematically represented by dividing the expected return by the standard deviation.

APFinancial Representatives

Business failure
A business that has terminated operations with a loss to creditors.

APFinancial mutual funds

Translation exposure
Risk of adverse effects on a firm'sfinancial statements that may arise from changes in exchange rates. Related: Transaction exposure.

APFinancial Insurance

Participating preferred stock
Preferred stock that provides the holder with a specified dividend plus the right to additional earnings under specified conditions.

APFinancial investment companies

: Seek a market
Search for a securitiesbuyer or seller.
APFinancial Personal
APFinancial growth rate
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Breakpoint Sale
For mutual funds, this refers to the practice of soliciting mutual fund purchases just below the breakpoint (to earn more commissions). The practice is considered unethical and in violation of NASD rules.

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APFinancial Careers: Put option
This security gives investors the right to sell (or put) a fixed number of shares at a fixed price within a given period. An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment.

APFinancial Comprehensive Proposals

Export-import Bank (Ex-IM Bank)
The U.S. federal government agency that extends trade credits to U.S. companies to facilitate the financing of U.S. exports.

APFinancial Investment

Primary trend
General movement in price data that lasts 4 to 4 1/2 years.

APFinancial Contact

Loaned flat
Securities lent interest-free between brokers to cover customers' short salepositions.

APFinancial Interests

: Noise
Price and volumefluctuations that can confuse interpretation of market direction. Used in the context of general equities. Stock market activity caused by program trades, dividend rolls, and other phenomena not reflective of general sentiment. Antithesis of real.
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AP Financial Capital
AP Financial Credits

Convertible price
The contractually specified price per share at which a convertible security can be converted into shares of common stock.



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