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Time-weighted rate of return Related: Geometric mean return.

Times-interest-earned ratio Earnings before interest and tax, divided by interest payments.

Timing option For a Treasury Bond or note futures contract, the seller's choice of when in the delivery month
to deliver.

Tobin's Q Market value of assets divided by replacement value of assets. A Tobin's Q ratio greater than 1
indicates the firm has done well with its investment decisions.

Tolling agreement An agreement to put a specified amount of raw material per period through a particular
processing facility. For example, an agreement to process a specified amount of alumina into aluminum at a
particular aluminum plant.

Tom next In the interbank market in Eurodollar deposits and the foreign exchange market, the value
(delivery) date on a Tom next transaction is the next business day. Refers to "tomorrow next."

Tombstone Advertisement listing the underwriters to a security issue.

Top-down equity management style A management style that begins with an assessment of the overall
economic environment and makes a general asset allocation decision regarding various sectors of the financial
markets and various industries. The bottom-up manager, in contrast, selects the specific securities within the
favored sectors.

Total asset turnover The ratio of net sales to total assets.

Total debt to equity ratio A capitalization ratio comparing current liabilities plus long-term debt to
shareholders' equity.

Total dollar return The dollar return on a nondollar investment, which includes the sum of any
dividend/interest income, capital gains or losses, and currency gains or losses on the investment. See also:
total return.

Total return In performance measurement, the actual rate of return realized over some evaluation period. In
fixed income analysis, the potential return that considers all three sources of return (coupon interest, interest
on interest, and any capital gain/loss) over some i nvestment horizon.

Total revenue Total sales and other revenue for the period shown. Known as "turnover" in the UK.

Tracking error In an indexing strategy, the difference between the performance of the benchmark and the
replicating portfolio.

Trade A verbal (or electronic) transaction involving one party buying a security from another party. Once a
trade is consummated, it is considered "done" or final. Settlement occurs 1-5 business days later.

Trade acceptance Written demand that has been accepted by an industrial company to pay a given sum at a
future date. Related: banker's acceptance.

Trade credit Credit granted by a firm to another firm for the purchase of goods or services.

Trade date In an interest rate swap, the date that the counterparties commit to the swap. Also, the date on
which a trade occurs. Trades generally settle (are paid for) 1-5 business days after a trade date. With stocks,
settlement is generally 3 business days after the trade.
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Trade debt Accounts payable.

Trade draft A draft addressed to a commercial enterprise. See:draft.

Trade on top of Trade at a narrow or no spread in basis points relative to some other bond yield, usually
Treasury bonds.

Trade house A firm which deals in actual commodities.

Traders Persons who take positions in securities and their derivatives with the objective of making profits.
Traders can make markets by trading the flow. When they do that, their objective is to earn the bid/ask spread.
Traders can also be of the sort who take proprietary positions whereby they seek to profit from the directional
movement of prices or spread positions.

Trading Buying and selling securities.

Trading costs Costs of buying and selling marketable securities and borrowing. Trading costs include
commissions, slippage, and the bid/ask spread. See: transaction costs.

Trading halt Trading of a stock, bond, option or futures contract can be halted by an exchange while news is
being broadcast about the security.

Trading paper CDs purchased by accounts that are likely to resell them. The term is commonly used in the
Euromarket.

Trading posts The posts on the floor of a stock exchange where the specialists stand and securities are traded.

Trading range The difference between the high and low prices traded during a period of time; with
commodities, the high/low price limit established by the exchange for a specific commodity for any one day's
trading.

Traditional view (of dividend policy)An argument that "within reason," investors prefer large dividends to
smaller dividends because the dividend is sure but future capital gains are uncertain.

Tranche One of several related securities offered at the same time. Tranches from the same offering usually
have different risk, reward, and/or maturity characteristics.

Transaction exposure Risk to a firm with known future cash flows in a foreign currency that arises from
possible changes in the exchange rate. Related:translation exposure.

Transactions costs The time, effort, and money necessary, including such things as commission fees and the
cost of physically moving the asset from seller to buyer. Related: Round-trip transaction costs, Information
costs, search costs.

Transaction loan A loan extended by a bank for a specific purpose. In contrast, lines of credit and revolving
credit agreements involve loans that can be used for various purposes.

Transaction demand (for money) The need to accommodate a firm's expected cash transactions.

Transactions motive A desire to hold cash for the purpose of conducting cash based transactions.

Transfer agent Individual or institution appointed by a company to look after the transfer of securities.

Transfer price The price at which one unit of a firm sells goods or services to another unit of the same firm.
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Transferable put right An option issued by the firm to its shareholders to sell the firm one share of its
common stock at a fixed price (the strike price) within a stated period (the time to maturity). The put right is
"transferable" because it can be traded in the capital markets.

Transition phase A phase of development in which the company's earnings begin to mature and decelerate to
the rate of growth of the economy as a whole. Related: three-phase DDM.

Translation exposure Risk of adverse effects on a firm's financial statements that may arise from changes in
exchange rates. Related: transaction exposure.

Treasurer The corporate officer responsible for designing and implementing many of the firm's financing
and investing activities.

Treasurer's check A check issued by a bank to make a payment. Treasurer's checks outstanding are counted
as part of a bank's reservable depostits and as part of the money supply.

Treasuries Related: treasury securities.

Treasury bills Debt obligations of the U.S. Treasury that have maturities of one year or less. Maturities for T-
bills are usually 91 days, 182 days, or 52 weeks.

Treasury bonds debt obligations of the U.S. Treasury that have maturities of 10 years or more.

Treasury notes Debt obligations of the U.S. Treasury that have maturities of more than 2 years but less than
10 years.

Treasury securities Securities issued by the U.S. Department of the Treasury.

Treasury stock Common stock that has been repurchased by the company and held in the company's
treasury.

Trend The general direction of the market.

Treynor Index A measure of the excess return per unit of risk, where excess return is defined as the
difference between the portfolio's return and the risk-free rate of return over the same evaluation period and
where the unit of risk is the portfolio's beta.

Triangular arbitrage Striking offsetting deals among three markets simultaneously to obtain an arbitrage
profit.

Triple witching hour The four times a year that the S&P futures contract expires at the same time as the S&P
100 index option contract and option contracts on individual stocks.

Trough The transition point between economic recession and recovery.

True interest cost For a security such as commercial paper that is sold on a discount basis, the coupon rate
required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays
interest in arrears.

True lease A contract that qualifies as a valid lease agreement under the Internal Revenue code.

Trust deed Agreement between trustee and borrower setting out terms of bond.

Trust receipt Receipt for goods that are to be held in trust for the lender.

TT&L account Treasury tax and loan account at a bank.
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Turnaround Securities bought and sold for settlement on the same day. Also, when a firm that has been
performing poorly changes its financial course and improves its performance.

Turnaround time Time available or needed to effect a turnaround.

Turnkey construction contract A type of construction contract under which the construction firm is
obligated to complete a project according to prespecified criteria for a price that is fixed at the time the
contract is signed.

Turnover Mutual Funds: A measure of trading activity during the previous year, expressed as a percentage of
the average total assets of the fund. A turnover ratio of 25% means that the value of trades represented one-
fourth of the assets of the fund. Finance: The number of times a given asset, such as inventory, is replaced
during the accounting period, usually a year. Corporate: The ratio of annual sales to net worth, representing
the extent to which a company can growth without outside capital. Markets: The volume of shares traded as a
percent of total shares listed during a specified period, usually a day or a year. Great Britain: total revenue.

12B-1 fees The percent of a mutual fund's assets used to defray marketing and distribution expenses. The
amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess
of 0.25% be classed as a load. A true " no load" fund has neither a sales charge nor 12b-1 fee.

12b-1 funds Mutual funds that do not charge an upfront or back-end commission, but instead take out up to
1.25% of average daily fund assets each year to cover the costs of selling and marketing shares, an
arrangement allowed by the SEC's Rule 12b-I (passed in 1980).

Two-factor model Black's zero-beta version of the capital asset pricing model.

Two-fund separation theorem The theoretical result that all investors will hold a combination of the risk-
free asset and the market portfolio.

Two-sided market A market in which both bid and asked prices, good for the standard unit of trading, are
quoted.

Two-state option pricing model An option pricing model in which the underlying asset can take on only two
possible (discrete) values in the next time period for each value it can take on in the preceding time period.
Also called the binomial option pricing model.

Two-tier tax system A method of taxation in which the income going to shareholders is taxed twice.

Type The classification of an option contract as either a put or a call.

Unbiased predictorA theory that spot prices at some future date will be equal to today's forward rates.

Unbundling When a multinational firm unbundles its transfer of funds into separate flows for specific
purposes. See: bundling.

Uncovered call A short call option position in which the writer does not own shares of underlying stock
represented by his option contracts. Also called a "naked" call, it is much riskier for the writer than a covered
call, where the writer owns the underlying stock. If the buyer of a call exercises the option to call, the writer
would be forced to buy the stock at market price.

Uncovered put A short put option position in which the writer does not have a corresponding short stock
position or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the
put. Also called "naked" puts, the writer has pledged to buy the stock at a certain price if the buyer of the
options chooses to exercise it. The nature of uncovered options means the writer's risk is unlimited.

Underfunded pension plan A pension plan that has a negative surplus (i.e., liabilities exceed assets).
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Underinvestment problem The mirror image of the asset substitution problem, wherein stockholders refuse
to invest in low-risk assets to avoid shifting wealth from themselves to the debtholders.

Underlying The "something" that the parties agree to exchange in a derivative contract.

Underlying asset The asset that an option gives the option holder the right to buy or to sell.

Underlying security Options: the security subject to being purchased or sold upon exercise of an option
contract. For example, IBM stock is the underlying security to IBM options. Depository receipts: The class,
series and number of the foreign shares represented by the depository receipt.

Underperform When a security is expected to appreciate at a slower rate than the overall market.

Underpricing Issue of securities below their market value.

Underwrite To guarantee, as to guarantee the issuer of securities a specified price by entering into a purchase
and sale agreement. To bring securities to market.

Underwriter A party that guarantees the proceeds to the firm from a security sale, thereby in effect taking
ownership of the securities. Or, stated differently, a firm, usually an investment bank, that buys an issue of
securities from a company and resells it to investors.

Underwriting Acting as the underwriter in a purchase and sale.

Underwriting fee The portion of the gross underwriting spread that compensates the securities firms that
underwrite a public offering for their underwriting risk.

Underwriting income For an insurance company, the difference between the premiums earned and the costs
of settling claims.

Underwriting syndicate A group of investment banks that work together to sell new security offerings to
investors. The underwriting syndicate is led by the lead underwriter. See also: lead underwriter.

Underwritten offering A purchase and sale.

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