Introduction to Finance

Reinvestment rate risk (rollover risk)
Fluc-
tuating interest rates cause coupon or interest 
payments to be reinvested at diff erent interest 
rates over time
Remote capture
Scanning of paper checks to 
electronically gather and transmit the payment 
information
Representative full-bodied money
Paper 
money that is backed by an amount of precious 
metal equal in value to the face amount of the 
paper money
Repurchase agreement
Short-term debt 
security sold by a business fi rm or fi nancial insti-
tution to another business or institution where 
the seller agrees to repurchase the security at a 
specifi ed price and date
Required reserves
Minimum amount of 
res erves that a depository institution must hold 
against its deposit liabilities
Required reserves ratio
Percentage of depos-
its that must be held as reserves by a depository 
institution
Residual dividend policy
A policy that 
states that dividends will vary based upon how 
much excess funds the fi rm has from year to year
Restricted stock
Shares of stock, awarded 
to managers, which vest, or become saleable, 
after a stated number of years, typically three 
to fi ve 
Retention rate
The proportion of each dollar 
of earnings per share that is retained by the fi rm
Revolving credit agreement (revolver)
A 
commitment in the form of a standby agreement 
for a guaranteed line of credit; a legal obligation 
of the bank to provide up to the agreed-upon 
borrowing limit during the time the agreement 
is in eff ect
Risk-adjusted discount rate (RADR)
Adjusts the required rate of return at which the 
analyst discounts a project’s cash fl ows based 
on the project’s risk