True interest cost

Similar financial terms

True lease
A contract that qualifies as a valid lease agreement under the Internal Revenue code.

Interest-rate risk on bonds
The price of a typical bond will change in the opposite direction from a change in interest rates. As interest rates rise, the price of a bond will fall; as interest rates fall, the price of a bond will rise. The actual degree of sensitivity of a bond’s price to changes in market interest rates depends on various characteristics of the issue maturity, coupon and special provisions.

Accrued interest
Interest earned but not yet due and payable. In the context of bond, it is the next coupon to be paid multiplied by the time elapsed since the last payment date and divided by the total coupon period.

Zero-coupon interest rate
The interest rate that would be earned on a bond that provides no coupons.

Term structure of interest rates
The relationship between interest rates and their maturities.

Fixed interest securities
Fixed interest securities relates to bonds, bills, stocks and debentures which offer a fixed rate of interest per period. The purchaser buys the income stream and the seller receives loan.

Amortizing interest rate swap
Swap in which the principal or national amount rises (falls) as interest rates rise (decline).

Times-interest-earned ratio
Earnings before interest and tax, divided by interest payments.

Stated annual interest rate
The interest rate expressed as a per annum percentage, by which interest payment is determined.

Spot interest rate
Interest rate fixed today on a loan that is made today.

Simple interest
Interest calculated only on the initial investment.

Short interest
This is the total number of shares of a security that investors have borrowed, then sold in the hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

Real interest rate
The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms of constant-purchasing-power dollars. Interest rate expressed in terms of real goods, i.e. nominal interest rate adjusted for inflation.

Rate of interest
The rate, as a proportion of the principal, at which interest is computed.

Pooling of interests
An accounting method for reporting acquisitions accomplished through the use of equity. The combined assets of the merged entity are consolidated using book value, as opposed to the purchase method, which uses market value. The merging entities' financial results are combined as though the two entities have always been a single entity.

Open interest
The total number of derivative contracts traded that not yet been liquidated either by an offsetting derivative transaction or by delivery.

Nominal interest rate
The interest rate unadjusted for inflation.

Minority interest
An outside ownership interest in a subsidiary that is consolidated with the parent for financial reporting purposes.

Benchmark interest rate
Also called the base interest rate, it is the minimum interest rate investors will demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a comparable-maturity Treasury security that was most recently issued ("on-the-run").

Best-interests-of-creditors test
The requirement that a claim holder voting against a plan of reorganization must receive at least as much as he would have if the debtor were liquidated.

Capitalized interest
Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time.

Cash flow after interest and taxes
Net income plus depreciation.

Compound interest
Interest paid on previously earned interest as well as on the principal.

Covered interest arbitrage
A portfolio manager invests dollars in an instrument denominated in a foreign currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for dollars.

Separate Trading of Registered Interest (STRIPS)
Separate Trading of Registered Interest and Principal Securities (STRIPS) are securities that have their periodic interest payments separated from the final maturity payment and the two cash flows are sold to different investors.

Net interest margin (NIM)
The difference between interest income and interest expense as a percentage of assets.

Nominal rate of interest
The annual return form lending money expressed as a percentage, without having taken account of the rate of inflation.

Agency costs
The cost of resolving the agency problem. These might include stock options and bonus schemes to managers.

Transactions costs
The transactions costs are the expenses to the execution of a trade. It includes the commissions plus the difference between the price obtained and the midpoint of the bid-offer spread.

Storage costs
The cost of storing commodity.

Cost of sales
The costs associated with generating reported sales, including merchandise, direct labor, and other costs attributed to current sales activity.

Direct costs
Costs related directly to sales.

Dollar cost averaging
A system of investing in which an unchanging dollar amount is invested at regular intervals, regardless of share price.

Accelerated cost recovery system (ACRS)
Schedule of depreciation rates allowed for tax purposes.

Agency cost view
The argument that specifies that the various agency costs create a complex environment in which total agency costs are at a minimum with some, but less than 100%, debt financing.

All-in cost
Total costs, explicit and implicit.

Weighted average cost of capital
The weighted average cost of capital (WACC) is the expected return on a portfolio of all the firm's securities when debt, equity and tax shields are taken into account. Used as a hurdle rate for capital investment.

Variable cost
A cost that is directly proportional to the volume of output produced. When production is zero, the variable cost is equal to zero. A variable is a cost of producing the product which a company sells. It would include such items as materials and labor that go directly into producing the shipped item. Another term for this is direct cost. These costs are usually shown directly under revenues on an income statement as the first costs associated with producing the revenues that are recorded.

Trading costs
Costs of buying and selling marketable securities and borrowing. Trading costs include commissions, slippage, and the bid/ask spread. See: transaction costs.

Sunk costs
Costs that have been incurred and cannot be reversed.

Shortage cost
Costs that fall with increases in the level of investment in current assets.

Search costs
Costs associated with locating a counterparty to a trade, including explicit costs (such as advertising) and implicit costs (such as the value of time).

Round-trip transactions costs
Costs of completing a transaction, including commissions, market impact costs, and taxes.

Replacement cost
Cost to replace a firm's assets.

Opportunity costs
The difference in the performance of an actual investment and a desired investment adjusted for fixed costs and execution costs. The performance differential is a consequence of not being able to implement all desired trades. Most valuable alternative that is given up.

Opportunity cost of capital
Expected return that is foregone by investing in a project rather than in comparable financial securities.

Net financing cost
Also called the cost of carry or, simply, carry, the difference between the cost of financing the purchase of an asset and the asset's cash yield. Positive carry means that the yield earned is greater than the financing cost; negative carry means that the financing cost exceeds the yield earned.

Market timing costs
Costs that arise from price movement of the stock during the time of the transaction which is attributed to other activity in the stock.

Market impact costs
Also called price impact costs, the result of a bid/ask spread and a dealer's price concession.

Bankruptcy cost view
The argument that expected indirect and direct bankruptcy costs offset the other benefits from leverage so that the optimal amount of leverage is less than 100% debt finaning.

Carring costs
Costs that increase with increases in the level of investment in current assets.

Cost company arrangement
Arrangement whereby the shareholders of a project receive output free of charge but agree to pay all operating and financing charges of the project.

Cost of capital
The required return for a capital budgeting project.

Cost of funds
Interest rate associated with borrowing money.

Cost of lease financing
A lease's internal rate of return.

Cost of limited partner capital
The discount rate that equates the after-tax inflows with outflows for capital raised from limited partners.

Cost-benefit ratio
The net present value of an investment divided by the investment's initial cost. Also called the profitability index.

Avoided cost
In context of project financing, the capital and expense that would have to be spent if the project did not proceed.

Replacement cost
What it would cost today to replace a company’s existing assets.

Fixed costs
Production expenses that are independent of the level of output. Fixed costs could include debt repayments, security costs and marketing and administration costs.

Zero Cost Collar
Is a transaction which has little or zero cash outlay or cost for the initiating person. Often, a security is held and some protection is sought via a hedging transaction. One example, would be the purchase of an out-of-the-money put (debit) and the sale of an out-of-the-money call (credit). Here, the premiums for the debit and credit are nearly the same. Therefore, there would be little or no cost for the person seeking the hedge. However, this position places a cap on the potential reward for ...