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- Capital asset pricing model
- An economic theory that describes the relationship between risk and expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification. The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security plus a risk premium multiplied by the asset's systematic risk. Theory was invented by William Sharpe (1964) and John Lintner (1965). The early work of Jack Treynor is was also instrumental in the development of this model.
- Capital budget
- A firm's planned capital expenditures.
- Capital budgeting
- The process of choosing the firm's long-term assets.
- Capital Builder Account
- A Merrill Lynch brokerage account that allows investors to access the loan value of his or her eligible securities to buy or sell securities. Excess cash in a CBA can be invested in a money market fund or an insured money market deposit account without losing access to the money.
- Capital expenditures
- Amount used during a particular period to acquire or improve long-term assets such as property, plant, or equipment.
- Capital flight
- The transfer of capital abroad in response to fears of political risk.
- Capital formation
- Expansion of capital or capital goods through savings, which leads to economic growth.
- Capital gain
- When a stock is sold for a profit, the capital gain is the difference between the net sales price of the securities and their net cost, or original basis. If a stock is sold below cost, the difference is a capital loss.
- Capital gains distribution
- A distribution to the shareholders of a mutual fund out of profits from selling stocks or bonds, that is subject to capital gains taxes for the shareholders.
- Capital gains tax
- The tax levied on profits from the sale of capital_asset. A long-term capital gain, which is achieved once an asset is held for at least 12 months, is taxed at a maximum rate of 20% (taxpayers in 28% tax bracket) and 10% (taxpayers in 15% tax bracket). Assets held for less than 12 months are taxed at regular income tax levels, and, since January 1, 2000, assets held for at least five years are taxed at 18% and 8%.
- Capital gains yield
- The price change portion of a stock's return.
- Capital goods
- Goods used by firms to produce other goods, e.g., office buildings, machinery, equipment.
- Capital growth
- The increase in an asset's market price. Also called capital appreciation.
- Capital infusion
- Often refers to the cross-subsidization of divisions within a firm. When one division is not doing well, it might benefit from an infusion of new funds from the more successful divisions. In the context of venture capital, it can also refer to funds received from a venture capitalist to either get the firm started or to save it from failing due to lack of cash.
- Capital International Indexes
- market_index maintained by Morgan Stanley that track major stock_market worldwide.
- Capital investment
- See Also: Capital expenditures
- Capital lease
- A lease obligation that has to be capitalized on the balance sheet.
- Capital loss
- The difference between the net cost of a security and the sales price, if the security is sold at a loss. Also used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.
- Capital market
- Traditionally, this has referred to the market for trading long-term debt_instrument (those that mature in more than one year). That is, the market where capital is raised. More recently, capital markets is used in a more general context to refer to the market for stocks, bonds, derivatives and other investments.
- Capital market efficiency
- The degree to which the present asset price accurately reflects current information in the market place. See Also: Efficient Market Hypothesis
- Capital market imperfections view
- The view that issuing debt is generally valuable, but that the firm's optimal choice of capital structure involves various other views of capital structure ( net corporate/personal tax, agency cost, bankruptcy cost, and pecking order), that result from considerations of asymmetric information, asymmetric taxes, and portfolio_transaction_costs.
- Capital market line
- The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.
- Capital rationing
- Placing limits on the amount of new investment undertaken by a firm, either by using a higher cost of capital, or by setting a maximum on the entire capital budget or parts of it.
- Capital requirements
- Financing required for the operation of a business, composed of long-term and working capital plus fixed_asset.
- Capital shares
- One of two types of shares in a dual-purpose investment company, which entitle the holder to the appreciation or depreciation in the value of a portfolio, as well as the gains from trading in the portfolio. Antithesis of income shares.
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