Buydown

Definition:

A lump sum payment made to the creditor by the borrower or by a third party to reduce the amount of some or all of the consumer's periodic payments to repay the indebtedness. In the context of project financing, refers to a one-time payment out of liquidated damages to reflect cash flow losses from sustained underperformance.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Payout ratio

Generally, the proportion of earnings paid out to the common stockholders as dividends. Morespecifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

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