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| − | [[Time preference for consumption]]. The preferences of consumers for [[current consumption]] as opposed to saving for [[future consumption]].
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| − | *[[Risk]]. In a [[financial market]] context, the chance that an investment will provide a low or negative return.
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| − | *[[Inflation]]. The amount by which prices increase over time.
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| − | *[[Real risk-free rate of interest]], ''r*''. The rate of interest that would exist on default free U.S. Treasury securities if no inflation were expected.
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| − | *[[Nominal risk-free rate]] ([[quoted risk-free rate]]), r/RF. The rate of interest on a security that is free of all risk; rRF is proxied by the T-bill rate or the T-bond rate; rRF includes an [[inflation premium]].
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| − | *[[Inflation premium]]. A premium equal to expected inflation that investors add to the real risk-free rate of return.
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| − | *[[Default risk premium]] ([[DRP]]). The difference between the interest rate on a U.S. Treasury bond and a corporate bond of equal maturity and marketability.
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| − | *[[Liquidity premium]] ([[LP]]). A premium added to the equilibrium interest rate on a security if that security cannot be converted to cash on short notice and at close to its “fair market value.
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| − | *[[Interest rate risk]]. The risk of [[capital loss]]es to which investors are exposed because of changing [[interest rate]]s.
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| − | *[[Maturity risk premium]] ([[MRP]]). A premium that reflects [[interest rate]] risk.
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| − | *[[Reinvestment rate risk]]. The risk that a decline in interest rates will lead to lower income when bonds mature and funds are reinvested.
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| − | *[[Term structure of interest rate]]. The relationship between bond yields and maturities.
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| − | *[[Yield curve]]. A graph showing the relationship between bond yields and maturities.
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| − | *[[Nominal yield curve]]. An upward-sloping yield curve.
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| − | *[[Inverted yield curve]] ([[abdominal yield curve]]). A downward-sloping yield curve.
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| − | *[[Humped yield curve]]. A yield curve where interest rates on intermediate-term maturities are higher than rates on both short and longterm [[maturities]].
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| − | *[[Pure expectations theory]]. A theory that states that the shape of the yield curve depends on investors' expectations about future interest rates.
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| − | *[[Foreign trade deficit]]. The situation that exists when a country imports more than it exports.
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| | [[Production opportunity]] is the investment opportunities in productive (cash generating) assets. | | [[Production opportunity]] is the investment opportunities in productive (cash generating) assets. |
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