Introduction to Finance

Zero-coupon bond
Has no coupon pay-
ments; its only cash return to the investor is 
payment of the bond’s principal, or par value, 
at maturity
Transactions motive
Demand for holding 
cash needed to conduct day-to-day operations
Transfer payments
Government payments for 
which no current productive services is rendered
Traveler’s letter of credit
Issued by a bank 
in one country and addressed to a list of for-
eign banks, which have agreed to purchase 
sight drafts presented to them by persons with 
appropriate letters of credit 
Treasurer
Oversees the traditional func-
tions of fi nancial analysis, including capital 
budgeting, short-term and long-term fi nancing 
decisions, and current asset management
Treasury bills
Federal debt obligations 
issued with matu rities up to one year
Treasury bonds
Federal obligations issued 
with original maturities in excess of 10 years, 
often issued for 20 and sometimes even 30 years
Treasury notes
Federal obligations usually 
issued for maturities of two to 10 years
Trend analysis (time series analysis)
Used 
to evaluate a fi rm’s performance over time
Trust indenture
An extensive document and 
details the various provisions and covenants of 
the loan arrangement
Trust receipt
(1) an instrument through 
which a bank retains title to goods until they 
are paid for; (2) lien against specifi c identi-
fi able items in inventory; whereby the bank 
retains ownership of the goods until they are 
sold in the regular course of business
Trustee
Represents the bondholders to ensure 
the bond issuer respects the indenture’s provisions
Underpricing
Represents the diff erence 
bet ween the aftermarket stock price and the 
off ering price