Note Buyers Guide 101

D debt An amount owed to another. See installment loan and revolving liability. deed The legal document conveying title to a property. deed-in-lieu A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure. Also called a voluntary conveyance deed of trust The document used in some states instead of a mortgage; title is conveyed to a trustee. default Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage. delinquency Failure to make mortgage payments when mortgage payments are due. deposit A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan. See earnest money deposit. depreciation A decline in the value of property; the opposite of appreciation. discount points See point. dower The rights of a widow in the property of her husband at his death. down payment The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. due-on-sale provision A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage. due-on-transfer provision This terminology is usually used for second mortgages. See due-on-sale provision. Date of Record The date on which a shareholder must officially own shares in order to be entitled to a dividend. Day High This is the highest price that a security has traded at during the day. Day Low This is the lowest price that a security has traded at during the day. DCF Discounted Cash Flows Dealer A person (or firm) who facilitates transactions in the secondary market. They make their living on the difference between the prices they pay for the assets in their inventory and what they sell them for. Debentures Unsecured debt Debt IOU, such as bank loans, bonds, commercial paper, government bonds and bills. Declaration Date The date on which a firm announces a future dividend payment. Default Risk Uncertainty of a firm's ability to meet its debt obligations on time and in full. Default Risk Premium (DRP) The additional return lenders require to compensate them for default risk. Deleted A security is no longer included in The Nasdaq Stock Market. Depreciation (1) Reduction in the book or market value of an asset. (2) Portion of an investment that can be deducted from taxable income. Derivative Security A financial asset whose value is based on an underlying asset. Options and futures are examples. Discount (1) The amount by which a bond or preferred stock may sell below its par value. (2) The notion that market prices takes into account or include all publicly available relevant information. Discount Bond A bond that sells at value below par value. Discount Broker Brokerage services provided at a cost lower than full-service brokers. Discounting The inverse of compounding. This process is used to determine the present value of a cash flow. Discount Rate (1) The interest rate used in calculating the present value of cash flows. The rate reflects the time value of money and risk of the cash flows. (2) The interest rate charged by the twelve Federal Reserve Banks for short-term loans made to member banks. Distribution Date Date on which the payout of realized capital gains on securities in the fund portfolio occurred. Diversifiable Risk The components of an asset's risk that can be eliminated when the asset is combined in a well-diversified portfolio. Divestiture A division of a company that is sold out to new investors. Dividend Distribution of wealth by firm to shareholders based on number of shares owned. Dividend Yield Dividends per share divided by the price of the security. DJIA (Dow Jones Industrial Average) This is the best known U.S. index of stocks. It contains 30 stocks that trade on the New York Stock Exchange. The Dow, as it is called, is a barometer of how shares of the largest U.S. companies are performing DRP See Default Risk Premium. Duration A measure of a bond price's sensitivity to a 100-basis point change in interest rates. A duration of 7 would mean that, given a 100-basis point change up/down in rates, a bond's price would move up/down by 7%.