Term
| What is a speculative investment? |
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Definition
| A high-risk investment made in the hope of earning a relatively large profit in a short time. |
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Term
| What are the Safety and Risk factors? |
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Definition
Safety in an investment means minimal risk of loss. Risk in an investment means a measure of uncertainty about the outcome. |
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Term
| What are two types of risks experienced with many investments? |
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Definition
Risk that you will not receive periodic income payments Risk that an investment will decrease in value |
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Term
| What are some investments that would be considered high risk today? |
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Definition
| Speculative Stocks, certain bonds, some mutual funds, some real estate, commodities, options, precious metals, precious stones, and collectibles |
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Term
| What is the interest rate risk? |
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Definition
| Associated with government or corporate bonds or preferred stock is the result of changes in the interest rates in the economy. |
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Term
| What are the components of the risk factor? |
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Definition
Inflation Risk Interest Rate Risk Busines Failure Risk Market Risk Global Investmen Risk |
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Term
| What is Asset Allocation? |
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Definition
| The process of spreading your assets among several different types of investments(sometimes referred to as asset classes) to lessen risk |
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Term
| What are two concerns that beginning investors face when they begin an investment program |
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Definition
They dont know where to get the information they need to evaluate potential investments.
Second they wont know what the information means when they do find it.
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Term
| Why do corporations issue common stock? Why do corporations prefer common stock? |
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Definition
Mostly for expansion A form of equity Dividends not mandatory Voting Rights and control of the company |
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Term
| Why do investors purchase common stock? |
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Definition
Income from Dividends Dollar appreciation of stock value |
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Term
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Definition
| Procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares. |
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Term
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Definition
| Assigned dollar value that is printed on a stock certificate |
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Term
| What is cumulative preferred stock? |
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Definition
| Stock whose unpaid dividends accumulate and must be paid before any cash dividend is paid to common stock holders |
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Term
| What is a blue chip stock? |
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Definition
| An investment that generally attracts conservative investors |
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Term
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Definition
| A stock that pays higher than average dividends |
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Term
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Definition
| A stock issued by a corporation that has the potential of earning profits above the average profits of all firms in the economy |
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Term
| What is a cyclical stock? |
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Definition
| A stock that follows the business cycle of advances and declines in the economy |
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Term
| What is a defensive stock? |
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Definition
| A stock that remains stable during declines in the economy |
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Term
| What is a large cap stock? |
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Definition
| A stock issued by a large corporation that has a large amount of stock outstanding and a large amount of capitalization, usually in excess of $5 billion |
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Term
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Definition
| The total amount of securities issued by a corporation |
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Term
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Definition
| A stock issued by a corporation that has a capitalization of between $1 billion and $5billion |
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Term
| What is a small cap stock? |
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Definition
| A stock issued by a company that has a capitalization of $500 million or less. |
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Term
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Definition
| A stock that typically sells for less than $1 per share |
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Term
| What is fundamental analysis? |
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Definition
| An investment practice based on the assumption that a stocks intrinsic or real value is determined by the companys future earnings. |
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Term
| What is technical analysis? |
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Definition
| An investment practice based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole |
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Term
| What is efficient market hypothesis(EMH) |
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Definition
| An investment theory based on the assumption that stock price movements are purely random; also called the random walk theory. |
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Term
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Definition
| A market in which an investor purchases financial securities, via an investment bank or other representative, from the issuer of those secuities. |
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Term
| What is an investment bank? |
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Definition
| A financial firm that assists corporations in raising fund, usually by helping to sell new security issues. |
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Term
| What is initial public offering? |
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Definition
| A market for existing financial securities that are currently traded among investors. |
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Term
| What is a secondary market? |
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Definition
| A market for existing financial securities that are currently traded among investors |
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Term
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Definition
| A request to buy or sell a stock at the current market value |
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Term
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Definition
| A request to buy or sell a stock at a specified price |
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Term
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Definition
| An order to sell a particular stock at the next available opportunity after its market price reaches a specified amount |
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Term
| What is a discretionary order? |
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Definition
| An order to buy or sell a security that lets the account executive decide when to execute the transaction and at what price. |
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Term
| What is a corporate bond? |
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Definition
| A corporations written pledge to repay a specified amount of money with interest. |
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Term
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Definition
| The dollar amount the bondholder will receive at the bond maturity |
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Term
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Definition
| For a corporate bond, the date on which the corporation its to repay the borrowed money. |
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Term
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Definition
| A legal document that details all of the conditions relating to a bond issue. |
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Term
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Definition
| A financially independent firm that acts as the bondholders representative |
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Term
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Definition
| A bond that is backed only by the reputation of the issuing corporation |
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Term
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Definition
| A corporate bond secured by various assets of the issuing firm |
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Term
| What is subordinated debenture |
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Definition
| An unsecured bond that gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments, repayment, and assets. |
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Term
| What is a convertible bond? |
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Definition
| A bond that can be exchanged, at the owners option, for a specified number of shares of the corporations common stock. |
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Term
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Definition
| A feature that allows the corporation to call in or buy outsatanding bonds from current bondholders before the maturity date. |
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Term
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Definition
| A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue. |
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Term
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Definition
| Bonds of a single issue that mature on different dates. |
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Term
| What is a registered bond? |
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Definition
| A bond that is registered in the owners name by the issuing company. |
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Term
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Definition
| A bond that is not registered in the investors name |
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Term
| What is a zero-coupon bond? |
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Definition
| A bond that is sold at a price far below its face value at maturity |
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Term
| What are some risks associate with investing in foreign bonds? |
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Definition
Legal Rights - It is an unenforceable legal claim should the country be taken over by an extremist political movement. Currency Exchange Risk - Any time you purchase a foreign bond that is bought and sold in a foreign currency, you are subject to currency risk. |
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Term
| What is an open-end fund? |
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Definition
| A mutual fund whose shares are issued and redeemed by the investment company at the request of investors |
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Term
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Definition
| The current market value of the securities contained in the mutual funds porfolio minus the mutual funds liabilities divided by the number of shares outstanding. |
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Term
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Definition
| A mutual fund in which investors pay a commission every time they purchase shares. |
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Term
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Definition
| A mutual fund in which the individual investor pays no sales charge. |
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Term
| What is a contingent deferred sales load? |
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Definition
| A1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund. |
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Term
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Definition
| A fee that an investment company levies to defray the costs of advertising and marketing a mutual fund and commisions paid to a broker who sold you shares in the mutual fund. |
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Term
| What are aggressive growth funds? |
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Definition
| Rapid growth by purchasing stocks whose prices are expected to invrease dramatically in a short period of time. |
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Term
| What is Equity income funds? |
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Definition
| Invest in stocks issued by companies with a long history of paying divedends. The major objective of these funds is to provide income too shareholders. |
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Term
| What is a global stock fund? |
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Definition
| Invest in stocks of companies throughout the world, including the United States. |
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Term
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Definition
| Invest in the same companies included in an index like the Standard & Poor's 500 stock index etc... |
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Term
| What are internation funds? |
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Definition
| Invest in foreign stocks sold in securities markets throughout the world; thus, if the economy in one region or nation is in a slump, profits can still be earned in others. |
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Term
| What are large cap funds? |
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Definition
| Invest in the stocks of companies with total capitalization of $5 billion or more. |
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Term
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Definition
| INvest in companies within the same industry. |
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Term
| What are socially responsible funds? |
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Definition
| Avoid investing in companies that may cause harm to people, animal, and the environment. |
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Term
| What is a high yield bond fund(Junk Bond) |
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Definition
| High yield, high risk corporate bonds |
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Term
| What are intermediate corporate bond funds? |
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Definition
| Invest in investment grade corporate debt with maturities between 5 and 10 years. |
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Term
| What are municipal bond funds? |
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Definition
| Invest in municipal bonds that provide investors with tax free interest income. |
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Term
| What are world bond funds? |
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Definition
| Invest in bonds and other debt securities offered by foreign companies and governments. |
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Term
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Definition
| A group of mutual funds managed by one invesment company. |
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Term
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Definition
| An individual who helps investors decide when to switch their investments from one fund to another fund, usually within the same family of funds. |
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Term
| What is a direct investment? |
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Definition
| An investment in which the investor hold legal title to property |
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Term
| What is an indirect investment? |
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Definition
| Investment in which a trustee hold legal title to property on behalf of the intestors |
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Term
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Definition
| A temporary association of individuals or firms organized to perform a specific task that requires a large amount of capital. |
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Term
| What is a real estate investment trust? |
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Definition
| A firm that pools investor funds and invests them in real estate or uses them to make construction or mortgage loans. |
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Term
| What is financial leverage? |
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Definition
| The use of borrowed funds for investment purposes. It enables you to acquire a more expensive property than you could on your own. |
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Term
| How are gold and precious metal prices driven up? |
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Definition
| Fear of war, political instability, and inflation |
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