CHAPTER 2 The Nature and Variety of Financial Intermediation

“Don’t it always seem to go that you don’t know what you’ve got ‘til it’s gone?”

Joni Mitchell

Glossary of Terms

Euro: Common currency adopted by many member countries of the European Union.

Yield Curve: Relationship between yield to maturity and maturity on debt instruments identical in all respects except maturities (see Chapter 4).

Duration: A measure of how long an investor must wait to receive payment on a bond. For bonds that repay only principal (zero coupon bonds), duration equals maturity. For coupon-paying bonds, duration is always shorter than maturity (see Chapter 4).

Spot Rate: The current yield to maturity on a bond of a given maturity (see Chapter 4).

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