EMPLOYEE STOCK OWNERSHIP PLAN Definition

Bookmark and Share

EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) is an employee benefit to acquire ownership of shares in their company without necessarily laying out personal capital.

Learn new Accounting Terms

MANAGEMENT EXPENSE is the management fee deducted from a funds average net assets to pay an advisor or sub-advisor. This fee is normally on a sliding scale. As the net assets of the fund increase, the percentage deducted for management fees decreases. A fund can also have a fixed rate or flat fee to compensate the advisor.

INTEREST RATE RISK results from increases and decreases in bond prices caused by changes in interest rates. When interest rates rise, the prices of bonds fall to compensate for the higher level of income demanded by investors. Bonds that carry less than the new market rate of interest must sell for lower prices. For example, if an investor purchases a bond at par value ($1,000) with a 7% coupon and interest rates rise to the point where the same bond later yields 9%, the bond will decline in price to the point where its yield to maturity is equivalent to the yield to maturity on a 9% current coupon. In other words, the investor will earn the prevail­ing market rate of 9%- by buying a bond priced at par with the 9% coupon, or by buying the bond at a discount to par with a 7% coupon.

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.