Definitions And Examples Of A Debenture Essay - 2287 Words

1.) Definitions and Examples. 1.1.) Annuity: â€Å"An annuity is the payment or receipt of equal cash flows per period for a specified amount of time† (Moyer, 2015). The term annuity refers to a financial contract that is written by an insurance company giving room for a series of guaranteed payments, it can either be for a specific period of time or even for the lifetime of one or more individuals. For example, regular deposits to a savings account, monthly insurance payments and pension payments, and monthly home mortgage payments. 1.2.) Debenture: â€Å"Issues not secured by specific assets are called debentures† (Moyer, 2015). A debenture is a term that refers to a type of debt instrument that is usually not secured by any physical assets or collateral. However, they are backed only by the general reputation and creditworthiness of the issuer. It is frequently issued by both corporations and governments to secure capital. For example, treasury bonds, and treasury bills are a government debenture. 1.3.) Risk: Risk is â€Å"the possibility that actual future returns will deviate from expected returns† (Moyer, 2015). Risk is the likelihood of gaining or losing something of value such as physical health, social status, and financial wealth. For example, gambler is willing to bet with all his salary, in this case the gambler s choice is a risk in that he could lose all his salary in the bet. 1.4.) Primary market: â€Å"An investor who purchases new securities is participating in a primaryShow MoreRelatedCost of Capital1479 Words   |  6 PagesCost of Capital Definition: cost of capital is the rate of return that a company must earn on its project investments to maintain its market value and attract funds. The cost of capital to a company is the minimum rate of return that is must earn on its investments in order to satisfy the various categories of investors, who have made investments in the form of shares , debentures and loans. The cost of capital in operational terms refers to the discount rate that would be used in determining theRead MoreCompany as a Separate Legal Entity1276 Words   |  6 PagesSEPARATE LEGAL ENTITY Definition: A legal entity, typically a business, that is defined as detached from another business or individual with respect to accountability. A separate legal entity may be set up in the case of a corporation or a limited liability company, to separate the actions of the entity from those of the individual or other company. Meaning: If a business is a separate legal entity, it means it has some of the same rights in law as a person. 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