# Glossary

### Margin

A margin is a term used to describe money borrowed from a brokerage to purchase securities. Investors who “buy on margin” via their brokerage borrow money from the brokerage to purchase securities. Margin is calculated as the difference between the value of securities purchased and held in the investor’s account and the dollar amount of funds lent by the broker to facilitate the purchase.

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### Margin Call

In a margin account, a margin call can occur when the value of the account drops to a certain level, triggering a margin call. Some traders/investors borrow funds from a broker for investments. The broker loans the funds at a certain interest rate. Borrowing money on margin is called using leverage. Using leverage is a double-edged sword — while it can boost an investor’s returns and can also multiply their losses. As an example, a trader has \$10k in cash and borrows \$10k from his broker to take a position in XYZ that is worth \$20k. The trader is using 50% margin. XYZ’s stock price proceeds to immediately fall, leaving the trader with an account value of only \$12k. The trader has \$2k in equity and a \$10k loan. However, his broker has a minimum margin requirement of 25%. 25% x \$12k = \$3k, which means, the trader should have \$3k in equity for the position but only has \$2k. The trader will receive a \$1k margin call to bring his equity back up to 25%.

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### Marginal Benefit

Marginal benefit is a dollar amount that a consumer is willing to pay for an additional unit of a product or service. Because of marginal benefit, the consumer receives additional satisfaction. A producer may try to create artificial demand by limiting the production of a product or access to a service. Driving up demand means consumers are willing to pay more, increasing the product’s or service’s marginal benefit to consumers. Marginal benefit is related to marginal utility but they are not the same. Marginal benefit is a dollar measurement, while the marginal utility is a use measurement.

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### Marginal Land

Marginal land is land that has little value and offers its owner little opportunity to profit from it. The term typically refers to land with poor soil or other undesirable characteristics that makes it difficult or near impossible to grow crops and thus turn a profit. While undesirable to hold, marginal land does have some utility in certain cases. It can be used as grazing grounds for livestock. Additionally, land that is considered marginal at one time can be considered desirable at another time if conditions in that market change. For instance, if the cost of growing corn on marginal land at one point in time does not exceed the revenue associated with selling such corn, land is considered marginal. But if conditions change and the price of corn rises, this land once considered marginal now offers some utility and opportunity to profit.

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### Marginal Utility

Marginal utility is a subjective concept. It deals with the additional, incremental amount of use someone is getting from a product or service. Trying to quantify an incremental use of a product is nearly impossible. The general idea behind marginal utility is that a person will continue using/consuming a product or service if the additional unit of utility provides additional gain above the product’s or service's additional unit of cost. In other words, the marginal utility is greater than the marginal cost. People will not buy or use a product or service if its marginal utility is less than its marginal cost.

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### Mark-to-Market

Typically used in accounting practice, mark-to-market refers to the measure given to asset and liability accounts that are in accordance with current market values. Having the ability to increase or decrease over time, this method looks to give a current, accurate depiction of an individual’s or business’s financial standing. To provide an easy, relatable example, stocks in the S&P 500 are marked-to-market everyday. Values are determined based on investor demand, and fluctuate based on how much the market values a particular piece of equity. Mark-to-market valuations may be more difficult in non-public markets and illiquid assets as much less real-time data exists. Although the mark-to-market model may provide an effective representation as to the current value of a company or asset, this measure may not prove as effective in times of uncertainty. When the market is shifting, and buyers continuously leave and enter the market, pricing becomes volatile and the mark-to-market method may prove inefficient and inaccurate.

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### Market Adjustments

A market adjustment is a change in market parameters or conditions brought about in response to one or more market signals (including price changes from shifts in supply and demand). These changes are typically characterized as cycles, fluctuations, or trends.

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### Market Analysis

Market analysis is the process of studying certain characteristics and trends of a market to determine its strengths, weaknesses, opportunities and threats.

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### Market Basket

A market basket is a group of consumer goods and services used to create the consumer price index (CPI). By comparing prices in the CPI from one year to the next, economists can determine if inflation is rising or falling. Market baskets are also used by investors to create indexes and mutual funds from stocks and bonds. These various market baskets are used by economists, retailers, and investors alike. Retailers use the CPI to predict impulse buys by consumers. As mentioned above, economists create a permanent mix of goods that are bought and sold. Investors create a market basket from bonds, stocks, and even of other indexes, such as the S&P 500. CPI is a macroeconomic indicator and a reflection of spending patterns. That is why it is useful to retailers. It is not a cost-of-living index. The government uses CPI to adjust monetary policy. Through feedback from consumer surveys, officials are able to put together spending patterns and average prices for items. To provide an accurate representation of the economy, the CPI covers a broad range of goods and services categories. These categories include recreation, apparel, housing, transportation, and education. In addition to consumer-related goods and services, CPI also includes government fees of public goods such as water and sewage. Any taxes levied on the products and services that are in the CPI are also included.

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### Market Cap

Market capitalization places a total dollar value on a company based on its outstanding shares. The market cap formula is simple — total outstanding shares multiplied by the current stock price. Market cap allows a company to be compared to competitors within its industry. Investors also use market cap as a measure of risk — a lower market cap can signify more risk. Market cap is divided into three categories: Small cap — \$300 million to \$2 billion Mid cap — \$2 billion and \$10 billion Large cap — Over \$10 billion Large cap companies are considered a low-risk staple of an investment portfolio.

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### Market Failure

A market failure is created when there is a mismatch between supply and demand. For example, there might not be enough supply to meet demand and vice versa. This mismatch is generally created by external events that are outside of efficient market operations. Some trigger points might be monopolies, government policies, market information breakdowns, and supply chain breakdowns (impairment of input mobility). An example of a market failure is a rise in minimum wages, which increases operational costs for businesses. Due to this increase, businesses hire fewer people, creating an artificial supply shortage. However, there are still plenty of laborers seeking jobs. There is now a mismatch between supply and demand.

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### Market Lease Rate

Market lease rate is the current rental rate that a space would likely command in the open market, indicated by current rents paid for comparable space within a given market. A lease executed at the market lease rate is said to be “at market” or “market rate.” Leases with rental rates greater than or less than the prevailing market rate are said to be “above market” or “below market, respectively.

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### Market Share

Market share is the percentage of revenues earned by a company within an industry compared to total revenues within the industry. It provides a method of determining a company’s size by revenue compared to similar companies.

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### Market Value

The most probable price that a property would command in a competitive and open market under fair sale conditions. Market value also refers to

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### Marketing Strategy

A marketing strategy defines how a company will reach potential consumers and hopefully turn them into customers. The market strategy integrates various market components together in a cohesive manner. This includes branding, messaging, product packaging, advertising, and the marketing plan. The marketing plan is different from the marketing strategy. The marketing strategy is a vision of how the company will present itself to potential and existing customers. The market plan contains details on how to execute that vision. For example, what ads should the company run, and when should specific marketing campaigns begin. The lifespan of the marketing strategy may last across several market plans, as the marketing vision continually evolves with its customers.

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### Master Lease

The primary lease that controls other sub-leases and may cover more property than all sub-leases combined.

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### Master of Business Administration (MBA)

A Master of Business Administration (MBA) is a graduate-level college degree. Most MBA programs require some type of entrance exam to enter. MBA programs are generally two years long. An MBA prepares students to analyze the performance of a business and make suggestions on how to improve it. Many MBA programs specialize in certain areas such as supply chain management, finance, marketing, entrepreneurship, and more. Some programs offer an abroad immersive experience that exposures students to business operations in other countries. Besides full-time programs, there are also part-time programs and executive MBAs, which target those already established in their careers.

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### Master Tenant

Tenant which is party to direct lease with the property owner which subsequently sub-leases all or a portion of the property to other occupants.

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### Master-Planned Community

Master-planned community is a large scale, mixed-use development that is constructed based off a long-term, comprehensive plan. These communities include a wide range of residential property types, such as townhouses and single family homes, complemented by a variety of commercial properties that serve the resident’s needs. Commercial properties include strip centers, restaurants, and office space. Other common features of a master-planned community include public parks, schools, and recreation areas such as a golf course.

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### Mean

The mean is the average of two or more numbers. There are two ways to calculate the mean. Each method is used for different reasons. One way to calculate the mean is called the arithmetic average and the other is the geometric average. The arithmetic average is the simpler calculation. It only requires adding the numbers and dividing the total count of numbers. For example, if you want to find the mean of 3, 5, and 9, you add them to get 17 and divide by 3 (total numbers) to get 5.667. The geometric mean involves multiplying the numbers and taking the nth root. Using the same three numbers from above, we get 135 after multiplying. Now we take the cube root (i.e., nth root) of 135 to get 5.13. In finance, the geometric mean is used more often since it keeps the dependency from one value to the next. The arithmetic mean treats each number as an independent value.

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### Median

The median is the middle number in a group of sorted numbers. The numbers can be sorted either way — ascending or descending. Sorting won’t change the median value. The median is a more descriptive representation of a set of numbers than the average. Especially with outliers, which create skew and can distort the mean, the median can be more useful. When there is an odd set of numbers, the median is the middle number. When an even set of numbers is used, we have two middle numbers. In this case, the two middle numbers are added together and divided by two to get the median.

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### Medicaid

Medicaid is a government-sponsored insurance program that works to assist low-income families and individuals in costs associated with medical care (e.g. doctor visits, hospital stays, long-term medical, custodial care costs). Primarily funded by the federal government, Medicaid operates at the state level and is available only to individuals and families that meet certain criteria that include legal and permanent residency in the United States and low-income generation.

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### Medium of Exchange

A medium of exchange replaces barter/trading economies. Rather than moving around products for trading, the economy’s consumers use the medium of exchange as a way to conduct various transactions. In a modern economy, the medium of exchange is currency. A medium of exchange must have a standard and stable value. Consumers must also accept and trust that the medium of exchange will retain its value and continue to remain in demand. If the medium of exchange begins to lose its value, consumers will no longer be able to budget or forecast with any accuracy. As well, determining supply and demand will become impossible.

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### Merger

A merger is an agreement in which two companies combine into one. Companies typically merge to create synergies, expand capabilities, reduce production costs, expand into new segments and ultimately create and/or enhance shareholder value. Whereas acquisitions are not considered voluntary, mergers are considered voluntary and require agreement on both sides. The five types of mergers are conglomerate, congeneric, market extension, horizontal and vertical.

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### Mezzanine Financing

Mezzanine financing is financing that is junior in interest to the mortgage but senior in interest to equity. Mezzanine financing has a similar risk and return profile to

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### Microeconomics

Microeconomics is the study of the way individuals and firms allocate scarce resources in the pursuit of productivity. It is the study of economic tendencies and the ways individuals and firms price and produce goods and services in response to shifts in demand, regime and/or production capacities. Considered a more settled science than macroeconomics, microeconomics seeks to explain what will happen to supply and demand for a product or products in a particular market when certain conditions change with regard to the pricing and/or supply of a good or service.

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### Mixed-Use

Building or project that provides more than one use (e.g., a loft or apartment project with retail, an apartment building with office space,

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### Moat

An economic moat is a term used to describe a distinct competitive advantage that a firm has over its competitors that allows it to maintain market share and profitability over an extended period of time. Firms that enjoy economic moats are typically scaled and have significant free cash flows that allow them to minimize operating expenses relative to competitors. Strong patents, brands and licenses are items that allow firms to control and minimize operating expenses, protect market share and make duplication by competitors extremely difficult. Pharmaceutical companies with patents on specific drugs are able to charge premium prices for the products, while suppliers such as Wal-Mart are able to undercut retail competitors by offering the lowest prices on the market because of immense free cash flows and vertically integrated supply chains.

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### Modern Portfolio Theory

Modern portfolio theory is based on the thought that one may be able to maximize expected return, given a level of market risk, by constructing a portfolio of assets based upon an “efficient frontier”. Modern Portfolio Theory is an extension of diversification, and is the idea that owning assets across various asset classes exposes you to less risk than owning just one. MPT argues that an investment’s risk and return profile should not be viewed in isolation, but looked at in aggregate with the portfolio as a whole.

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### Modified Gross Lease

A modified gross lease is a rental agreement where the tenant pays base rent at the lease’s inception, but in subsequent years, also pays a proportional share, or

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### Monetary Policy

Monetary policy is the method by which central banks and other financial regulators govern the supply of money and interest rates in an economy to promote stable prices and low unemployment. Monetary policy can either be classified as expansionary or contractionary, depending on the regulator’s objectives. Central banks and regulators seek to use tools such as control of money supply and interest rates to influence output, employment and prices.

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### Money Laundering

Money laundering is the process of making funds generated from illegal or illicit activities appear to be legitimately sourced. For example, revenues generated from drug trafficking need to be properly laundered to avoid the attention of authorities. Criminal organizations will seek to deposit these funds into financial institutions, but can only do so if they can convince the bank that the funds are the product of legal operations. Money laundering in itself is also a crime.

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### Money Market

The money market trades in short-term debt instruments. It includes two types of participants — commercial and retail. Commercial participants (or wholesale participants) such as financial institutions, buy short-term debt for its liquidity and returns. Retail investors don’t buy debt directly but instead buy money market funds. These funds often have higher rates than savings accounts but are still very liquid, which makes them attractive to investors. Retail investors can also open a money market account, which is similar to a savings account but also with higher rates while still maintaining liquidity, although they do have certain restrictions.

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### Money Order

A money order is a certified backed by cash and issued by a government or banking institution. They can be purchased at a number of locations for a small fee. A money order is cash on delivery. Some government agencies require particular types of payments that are backed by cash (i.e., cashier’s check and money order). Money orders must be paid with a debit card or cash. Personal checks and credit cards are not valid forms of payment since they are not backed by guaranteed cash and can be canceled after the money order has been purchased.

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### Money Supply

Money supply is a snapshot of the amount of currency and liquid assets in an economy. Central banks control the money supply. When an economy is growing slowly, its central bank increases the money supply to provide stimulation. When the economy is growing too fast, the central bank will decrease the money supply to slow it down and decrease inflation. The method central banks use to control the money supply is the increase/decrease of interest rates, a part of monetary policy. Money supply has five different subgroups — M0, MB, M1, M2, and M3. M0 is hard currency in circulation. MB is M0 + hard currency held in bank reserves. M1 is M0 + checking accounts. M1 is a common measure of money supply. M2 is M1 + savings + CDs. M3 includes larger deposits + institutional money market funds + other larger liquid assets.

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### Monopolistic Competition

Monopolistic competition sits between perfect competition and monopoly. There are many competitors and entry into and exit out of the market is easy (no barriers). Products created by firms are similar but through marketing, firms are able to differentiate their products. Because perfect information doesn’t exist in this market, firms are able to earn a profit in the short run. In the long run, the story is different. Like perfect competition, companies break even over the long run. If one company experiences profit above its competition, more companies will enter the market and drive down prices. If companies begin experiencing losses, competitors will leave the market driving losses back to break even.

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### Month-to-Month Tenancy

Short-term tenancy terms in which a tenant rents from a landlord month to month. Although increasing vacancy and turnover risk, month-to-month tenancy offers several advantages to landlords that include the chance to negotiate lease terms more often, providing the opportunity to raise rent, while also providing the ability to get rid of troublesome tenants. Often times long-term leases convert to month-to-month tenancies at the end of the original lease term, if another lease has not been signed. This type of tenancy is most commonly found in residential leases, but can include commercial leases as well.

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### Moral Hazard

A moral hazard is created when two parties enter into an agreement or contract, but there are no consequences for not following the agreement. In a formal business contract, one party may take unnecessary risks in an attempt to generate profits before the contract finalizes.

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### Mortgage

Mortgage is a legal instrument that pledges the rights of ownership of an asset or property to a lender as security for a loan.

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### Mortgage Broker

A mortgage broker is a type middleman that connects mortgage borrowers with mortgage lenders. Tasked with helping qualify borrowers for a loan, whether it be for a purchase mortgage of refinance, mortgage brokers help borrowers shop interest rates with potential lenders, determine appropriate loan amounts and loan-to-value ratios, and help execute the application process. Similar to a real estate broker on the buy-side, mortgage brokers are compensated by the lender through an origination fee.

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### Multi-Tenant Property

A multi-tenant property is a property that has two or more tenants. Compared to single tenant properties, multi-tenant properties can be more management intensive and may have less predictable cash flow.

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### Multinational Corporation

A multinational corporation (MNC) is a company that has a presence in its home country and at least one other country. In the case of large MNCs, its assets, factories, and various facilities are spread across the globe. Being so globally distributed, the company can more efficiently conduct business in multiple countries, allowing it to serve not only those countries but surrounding regions. For investors, MNCs offer diversification. Should one country experience political unrest or more restrictive regulations/laws, the MNC is able to shift assets and operations to other more favorable areas. A single company operating within an adverse country will have more difficulty under such conditions.

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### Municipal Bonds

A municipal bond is a debt issued by a government authority, whether that be federal, state, local, or a municipality. Municipal bonds are considered low risk, which means they also pay low interest. These low-interest payments are advantageous to the issuing authority, as it reduces their cost of debt, compared to corporate bonds. The issuing authority uses its bonds to pay for capital expenditures. Non-capital expenditures (i.e., expenses) are paid for with revenue from taxes. Most municipal bonds are exempt from federal taxes and some are exempt from state taxes. Because of these exemptions, high-income investors buy municipal bonds for their taxable accounts rather than retirement accounts. Municipal bonds are callable, which means the issuing authority can pay off the bond early, decreasing its overall yield.

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### Mutual Funds

A mutual fund is an investment vehicle that pools money from the public and provides individual investors access to professional managed portfolios of equities, bonds and other security types. The value and performance of a mutual fund is thus based upon the pro rata performance of the various securities that comprise the fund.

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