Introduction to Finance

Eff ective annual rate (EAR)
Measures 
the 
true interest rate when compounding occurs 
more frequently than once a year
Effi
cient market (informationally effi
cient 
market)
A market in which prices adjust 
quickly after the arrival of important news 
surprises
Electronic data interchange
The use of 
communications and computer systems to 
convey ordering, invoice, and payment infor-
mation between suppliers and customers
Enhancement
Increase in the cash fl ows of 
the fi rm’s other products that occur because of 
a new project
Entrepreneurial fi nance
Study of how 
growth-driven, performance-focused, early-stage 
fi rms raise fi nancial capital and manage their 
operations and assets
Equilibrium exchange rate
Currency 
exchange rate where the supply and demand 
for a currency are in balance 
Equilibrium interest rate
Price that equates 
the demand for and supply of loanable funds
Equipment trust certificate
A type of 
mortgage bond that gives the bondholder a 
claim to specifi c “rolling stock” (movable 
assets), such as railroad cars or airplanes
Equity
Funds supplied by the owners and 
represents their residual claim on the fi rm
Equity securities
Ownership shares, called 
common stocks, in corporations
Equity securities markets
Where owner-
ship rights in corporations are initially sold and 
traded 
Ethical behavior
How an individual or 
organization treats others legally, fairly, and 
honestly
Euro
A single currency that has replaced the 
individual currencies of the eurozone member 
countries
Eurodollar bonds
Dollar-denominated 
bonds 
sold outside the United States