What Is a Purchase Annual Percentage Rate (APR)? A purchase annual percentage rate (APR) is the interest rate that you are charged on purchases when you have a balance on your credit card. The APR on a credit card is an annualized percentage rate that is applied monthly. If the advertised APR on a credit
What Is a Purchase Fund? A purchase fund is a feature of some bond indentures and preferred stock that requires the issuer to make an effort to purchase a specified amount of securities if they fall below a stipulated price (usually par value). Par value is a term that often describes a bond, but can
What Is a Purchase-Money Mortgage? A purchase-money mortgage is a mortgage issued to the borrower by the seller of a home as part of the purchase transaction. Also known as a seller or owner financing, this is usually done in situations where the buyer cannot qualify for a mortgage through traditional lending channels. A purchase-money
What Is a Purchase Money Security Interest (PMSI)? The term purchase money security interest (PMSI) refers to a legal claim that allows a lender to either repossess property financed with its loan or to demand repayment in cash if the borrower defaults. It gives the lender priority over claims made by other creditors. In simpler
What Is Purchasing Power? Purchasing power is the value of a currency expressed in terms of the number of goods or services that one unit of money can buy. It can weaken over time due to inflation. That’s because rising prices effectively decrease the number of goods or services you can buy. Purchasing power is
What Is a Purchasing System? A purchasing system is a process for buying products and services encompassing purchase from requisition and purchase order through product receipt and payment. Purchasing systems are a key component of effective inventory management in that they monitor existing stock and help companies determine what to buy, how much to buy
What Is a Pure Discount Instrument? A pure discount instrument is a type of security that pays no income until maturity. Upon expiration, the holder receives the face value of the instrument. The instrument is originally sold for less than its face value—at a discount—and redeemed at par. Key Takeaways Pure discount instruments pay no
What Is Pure Risk? Pure risk is a category of risk that cannot be controlled and has two outcomes: complete loss or no loss at all. There are no opportunities for gain or profit when pure risk is involved. Pure risk is generally prevalent in situations such as natural disasters, fires, or death. These situations
What Is a Pure Yield Pickup Swap? A pure yield pickup swap is the practice of exchanging one set of bonds for another, intending to increase the yield received on those bonds. Importantly, the term assumes that the increase in yield will not be achieved at the expense of increasing the riskiness of the bonds.
What Is the Prospect Theory? Prospect theory assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. Also known as the “loss-aversion” theory, the general concept is that if two choices are put before an individual, both equal, with one presented in terms of
