Finance terminologies

Jun 21st, 2015
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What Does A Priori Probability Mean? Probability calculated by logically examining existing information. A priori probabilities are most often used within the counting method of calculating probability. This is because you must use logic to determine what outcomes of an event are possible in order to determine the number of ways these outcomes can occur.

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Finance terminologiesWhat Does A Priori Probability Mean?Probabilitycalculated by logically examining existing information.A priori probabilities are most often usedwithin thecounting method of calculating probability. This is becauseyou must use logic to determine what outcomes of an event are possible in order to determine the number of ways these outcomes can occur. For example, consider how the price of a share can change. Its price can increase, decrease, or remain the same. Therefore, according to a priori probability, we can assume that there is a1-in-3, or 33%, chance of one of theoutcomes occurring (all else remaining equal).What Does Above Par Mean?A term used to describe the price of a security when it is trading above its face value. A security usually trades at above par when its income distributions are higher than those of other instruments currently available in the market.If an investor purchases a security above face value, he or she will incur a capital loss at maturity when it is redeemed for face value.For example, a 5-year bond with $1,000 face value that pays a coupon of 10% annually may trade closer to $1,168 if similar bond rates decline to 6%. This is because investors are willing to pay more for a higher coupon; thus, it is said to be trading above par.In order to make its yield equal current market rates, the bond should trade at its present value.In the above example, the following calculation was used to determine

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