Sweat EquityA program which allows a purchaser to do work on the property in place of all or part of the down payment and other costs of purchase.
Sweat equityAn increase in equity created by the labor of the owner.
Equity risk premiumEquity risk premium
The concept that justifies investment in stocks, where your capital is at risk, rather than gilt-edged bonds which are as safe an investment as you can get and where your capital is not at risk provided you hold the bond til maturity.The theory goes that it is only worth investing in stocks if the return you get exceeds the return you could get on gilts - otherwise, why would you take on the extra risk? The difference in returns is known as the equity risk premium.Every historical analysis of returns achieved by stocks compared to bonds shows that stocks outperform bonds in the long term. This is why you repeatedly hear pundits say that the stock market, while risky in the short term, is not risky in the long term. The key thing, as a private investor, is to leave your money in the market for long enough for the long term benefit to eradicate the short term risk. Stick your money in the market for two months, and it might go down 20% if you are unlucky. Stick it in a well-diversified portfolio for 30 years, and it should produce returns that comfortably exceed what you could have got from bonds.
Negative equityNegative equity
A situation where the purchaser of a property has taken out a mortgage and some time after the purchase, the value of the property falls below the mortgage amount. For example:Purchase price of property: £80,000Deposit: £10,000Mortgage: £70,000If the value of the property falls below £70,000, the mortgage holder has negative equity in the property.
Debt/equity swapDebt/equity swap
An exchange of debt for equity, in which a lender is given a share of ownership to replace a loan. Used as a method of resolving debt crises.
Return on equityReturn on equity
The adjusted profit of a company divided by its equity. For instance, if the adjusted profit of a company is £1m and Equity is £10m, the Return on Equity is 10%.Adjusted profit is the profit of the company adjusted to exclude the impact of non-recurring exceptional gains, losses, income and charges. The figure can be found in the company's Profit and Loss Account. Equity is the total of ordinary share capital plus reserves, and both figures appear in the company's Balance Sheet. In calculating Return on Equity, you can use the Equity at the end of the year or the average between the opening and closing equity.
Equity floorEquity floor
An agreement in which one party agrees to pay the other at specific time periods if a specific stock market benchmark falls below a predetermined level.
Further SuggestionsPreferred equity redemption stock (PERC)
personal equity plan
Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
Stratified equity indexing
debt to equity ratio
GEM (growing equity mortgage)
Salomon Brothers World Equity Index (SBWEI)
Dual syndicate equity offering
Appel Loan (Accelerating Payoff Progressive Equity Loan)
All equity rate
Cost of equity
World Equity Benchmark Series (WEBS)
Equity linked Eurobonds
Return on equity (ROE)
Equity Line Of Credit