Introduction to Finance

f
present value/interest rate, relationship, 
229
f
solving, 231, 238–239
spreadsheet solution, 231, 238
table-based solution, 231, 238
Time requirements
annuities, 237–239
determination, 230–232
Time series analysis (trend analysis), defined, 
424
Time spreads (horizon spreads). 
See
U.S. 
Treasury securities
Time to maturity, 263–264
Time value of money
defined, 220
finance principle, 8
Time value (specualtive value of an option), 339
Title XIII (Pay It Back Act), 109
Token coins, defined, 28
Token (copper-nickel-clad) U.S. coins, 
examples, 29
f
Token money, coins, 36

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INDEX
635
Weighted average cost of capital (WACC), 
defined, 574
Welfare payments, 111
Wells Fargo Bank
capital project, 525
mission, 383
Wildcat banking, 56
Window dressing, occurrence, 456
Working capital
defined, 395, 491
financing, strategies, 491–495
management
importance, 470
technology, relationship, 484–485
reduction, 455
requirements, 460–463
World Bank, defined, 132
World War I, inflation, 208
World War II, inflation, 208–209
Y
Yankee bonds, defined, 260
Yearly operating cash flows, estimation, 
562
Year 2000 (Y2K) problem, 185
Yield curve, 186
f
construction, U.S. government securities 
(usage), 203
defined, 203
differentiation, 205
economy, relationship, 205
examples, 472
f
flat characteristic, 205
riding, 471
upward slope, 205
Yield to maturity (YTM), 571
calculation, 280–281
defined, 279
Z
Zero-balance account, defined, 477
Zero-coupon bond, defined, 264
Zero-coupon bonds, interest (absence), 
264–265
Zero-coupon securities, 283
measures, 352–353
risk measure, 345–346
Velocity of money (VM), 125
defined, 38, 125
increase, 38–39
Venture capital, financing source, 570
Venture capitalists, rates of return 
(determination), 229
Vision, usage, 383
Volcker, Paul, 84, 85
Voluntary savings, defined, 175
W
Wachovia Bank, purchase, 47
Walgreens
arithmetic average annual rate of return, 
344–345
asset management ratios, 432
f
balance sheet, 394
t,
426
t
data, application, 347
DuPont analysis, 441
t
financial data, 458
t
financial leverage ratios, 435
f
historical variance, 346
income statement, 392
t,
426
t
liquidity ratios, 428
f
market value ratios, 438
f
percent-of-sales balance sheets, 443
t
profitability ratios, 437
f
ratio analysis, summary, 439
returns
distribution, 348
t
variance computation, 346
t
statement of cash flows, 398
t
stock prices, 344
f
Wall Street Journal, The,
149, 269
Warehouse receipt, defined, 513
War of 1812, inflation, 208
Washington Mutual, failure, 47
Weak-form efficient market, defined, 357
Weighted average cost of capital (WACC), 
574–578
debt ratio, differences, 589
f
target weights, measurement, 574–576
usage, 574
debt instruments, risk-free securities, 
198–203
financing, dealer capacity, 200
funds, deposit, 124
income payment, 110
interest costs, restraint, 114
loan accounts, 110
notes, defined, 199
policy instruments, 108
receipts/outlays, 110
tax accounts, 110
Tax and Loan Accounts, 110
transactions, 124
U.S. Treasury bills
defined, 34, 199
interest rates, 204
purchase, short-term return, 365
rates
commercial paper rates, differences, 
475
f
example, 472
f
sale, 470–471
U.S. Treasury bonds
defined, 181, 199–200
returns, 360
f
stocks, relationship, 360
U.S. Treasury securities
horizon spreads (time spreads), 283
f
interest rates, term structure, 201
t
public debt ownership, 201
t
yield curves, 204
f
Usury, defined, 242
Utilization ratio, 429
V
Valuation. 
See also
Bonds; Stocks
domestic economic influences, 288
financial environment (relationship), 287–289
global economic influences, 287–288
industry/competition, 288–289
principles, 274–276
Variable-rate mortgages, 203
Variance. 
See also
Portfolio
computation, examples, 346
t,
351–352
defined, 345

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