Term
|
Definition
| A financial instrument that may trade for value. |
|
|
Term
|
Definition
Investors who own common stock have certain rights, including:
- to vote
- to transfer ownership
- to receive dividends once declared
-A junior claim to assets of the corp. in the event of liquidation. |
|
|
Term
|
Definition
| A corporation receives authorization to sell a specific number of shares of common stock. |
|
|
Term
|
Definition
| authorized shares that are actually sold to investors. |
|
|
Term
|
Definition
| Authorized shares that have not yet been sold. |
|
|
Term
|
Definition
| Stock that has been issued and subsequently bought back by the corporation and temporarily retired; have no voting rights and receive no dividend. |
|
|
Term
|
Definition
The number of issued shares that are in the hands of investors at any give time.
Issued - Treasury = Outstanding |
|
|
Term
|
Definition
Include property, amounts of receivable cash, inventory etc.
Assets = Liabilities + Net worth
Assets- Liabilities = Net worth |
|
|
Term
|
Definition
| What the company owes, such as current bills, accounts payable, outstanding bonds and other debt. |
|
|
Term
|
Definition
Any owner of common stock has the right to attend stockholder meeting and vote on issues such as:
-Election of the board of dir.
-Decisions about changes in the operations
-Issuance of additional securities |
|
|
Term
|
Definition
| Is a limited power of attorney that stockholders grant to someone to vote the stock either at their own discretion or at the instruction of the board of directors. |
|
|
Term
|
Definition
Shareholders are permitted one vote for each share they own.
1 Vote per Vacancy per Share |
|
|
Term
|
Definition
Shareholders can multiply the number of shares owned by the number of directorships and cast the votes in any manner desired.
Total # of Votes= # of shares x # of Vacancies |
|
|
Term
|
Definition
| The price and quantity of shares in the transaction are determined. |
|
|
Term
|
Definition
| Represents the date by which securities bough must be paid for, or securities sold must be delivered. |
|
|
Term
|
Definition
| Investors holding shares of common stock have the right to participation in the earnings of the issuing through these cash distributions. |
|
|
Term
|
Definition
| The date on which the board authorizes a dividend to be paid to shareholders; the dividend becomes a current liability of the corporation and must be paid. |
|
|
Term
|
Definition
| The date where whoever is on record in the corporations' books will receive the dividend. |
|
|
Term
|
Definition
| Buyers who purchase stock on or after this date are not entitled to receive a dividend. |
|
|
Term
|
Definition
| Is a method for measuring a stockholder's return on investment. |
|
|
Term
| How to calculate Dividend Yield: |
|
Definition
| Dividend Yield = Annual Dividend / Share Price |
|
|
Term
|
Definition
| Allow existing shareholders to maintain their same percentage of ownership in a corporation when new shares are issues. Shareholders are given first opportunity to purchase a sufficient # of the new shares to maintain their current % of ownership. |
|
|
Term
|
Definition
| Allows the purchase of stock at a set price over a set period of time; provide and opportunity to purchase securities at a set price. Are usually long-term and are issued originally with an exercise price above the current market value stock. |
|
|
Term
| American Depositary Receipts (ADRs) |
|
Definition
| Certificates issued by a commercial United States bank to represent ownership of shares of a foreign company. |
|
|
Term
|
Definition
| Legally binding contracts between buyers and sellers. The buyer of an option gains the right to buy or the right to sell a round lot of an underlying security at a set price; has a definite start and expiration date. |
|
|
Term
|
Definition
| The right for a buyer of option gains to buy a round of securities within a given time at a specified price. |
|
|
Term
|
Definition
| The right for a buyer of option gains to sell a round of securities within a given time at a specified price. |
|
|
Term
|
Definition
| Describes an investor who expects the value of the security to appreciate; price to increase. |
|
|
Term
|
Definition
| Describes an investor who expects the value of the security to depreciate; price to decrease. |
|
|
Term
|
Definition
| This act provides purchasers of new issues of securities with info regarding the issuer. Prevents fraud in the sale of securities in the primary market. Requires that prospective investors be provided w/ a prospectus that contains info about the issuer. |
|
|
Term
| Securities Exchange Commission (SEC) |
|
Definition
| Is responsible for the enforcement of securities laws; it does not pass approval on the investment merits of an issue. |
|
|
Term
| Initial Public Offerings (IPOs) |
|
Definition
| A new issue is a corporation's first distribution of stock to the public. |
|
|
Term
|
Definition
| When a corporation is already public but distributes additional securities. |
|
|
Term
|
Definition
| A registered offering by a current shareholder, of a large number of outstanding shares of a security. |
|
|
Term
|
Definition
| Is seen as an expert in the field of raising capital and distributing an issue to the public. It is their responsibility to raise capital and distribute the issue to the public so the corporation can focus on business. |
|
|
Term
|
Definition
| it is the difference in price between what the issuer receives and what the public pays for the offering; the portion of the proceeds that the investment bank receives. |
|
|
Term
|
Definition
| The day that the SEC receives the registration statement filed in order to sell securities to the public. |
|
|
Term
|
Definition
| The 20 days after a filing date, where the SEC reviews the information. |
|
|
Term
|
Definition
| Has a red border around the cover page, which informs investors that registration statement has been filed with the SEC but has not yet become effective. Does not contain a final offering price. |
|
|
Term
|
Definition
| Requires that new issues must be registered under state securities laws that govern the registration of securities and securities personnel. |
|
|
Term
|
Definition
| A meeting with the underwriter, officers, directors, and syndicate members prior to the issuance of a the final prospectus in order to review all aspects of the issue and determine if the disclosure information is accurate and sufficient. |
|
|
Term
|
Definition
| Even though a registration statement has been filed or in effect does not mean that the SEC has determined it to be true, accurate or complete. It is the issuer's responsibility to assure accuracy and inclusion of all material information. |
|
|
Term
|
Definition
| The SEC reviews many things however, the approve nothing! |
|
|
Term
|
Definition
Securities that are from registration and prospectus reqs. Include:
-US government & municipal securities
-Issues of nonprofit orgs
-commercial paper
-issues of domestic banks and trust companies & of small business investment companies |
|
|
Term
|
Definition
Exemption, allows a company avoid the underwriter and registration reqs through a private placement. Requirements:
-Cannot be sold to more than 35 nonaccreddited investors. -The buyer is a sophisticated investor and must be provided the same info in a prospectus. |
|
|
Term
|
Definition
| The buyer has enough experience to evaluate the risks involved. |
|
|
Term
|
Definition
Consists of both the exchange and the over-the-counter (OTC) market.
Secondary Market = Trading of Issued Securities |
|
|
Term
| New York Stock Exchange (NYSE) |
|
Definition
| Is the oldest and largest exchange market in the US. It's a physical location where brokers and dealers execute investor orders to buy and sell securities. |
|
|
Term
|
Definition
| is an individual who has a membership on the exchange. |
|
|
Term
|
Definition
| A member firm must have an individual employee who owns a seat on the exchange. |
|
|
Term
|
Definition
| Dealers who a capable of making continuous offerings to buy and sell stocks. |
|
|
Term
| NASDAQ System (National Association of Securities Dealers Automated Quotation System) |
|
Definition
| Provides subscribers with terminals that allow them to obtain current offers and bids of over-the-counter securities. |
|
|
Term
| Non-NASDAQ Over-the-Counter (NNOTC) |
|
Definition
| Do not need to meet listing requirements; can be found on the Over-the-Counter Bulletin Board or in a weekly publication, Pink Sheets. |
|
|
Term
|
Definition
| Is the current price of the security and represents the price that the owner would receive if he or she were to sell at that time. |
|
|
Term
|
Definition
| Filled out by an investor who wishes to buy or sell at the market value fills this out; does not specify the price and will be filled at current market price. |
|
|
Term
|
Definition
| The price at which the customer can sell shares. Represents the highest price that the dealer is willing to pay for a security. |
|
|
Term
|
Definition
| the price at which the customer can buy the shares. The lowest price that the dealer is willing to accept when selling the security. |
|
|
Term
| The Federal Reserve Board (FRB) |
|
Definition
| Granted authority under Regulation T of the Securities Exchange Act of 1934, to establish margin requirements for broker/dealers. The current regulation T margin is 50% |
|
|
Term
|
Definition
| The practice of pledging securities as collateral for margin loans. |
|
|
Term
|
Definition
| Securities that can be purchased on margin. |
|
|
Term
|
Definition
| Customers who purchase securities must deposit at least 50% of the value of the securities. |
|
|
Term
|
Definition
| are ineligible for margin purchase for 30 days; if the mutual fund is approved for margin, the customer may use it as collateral after the fund has been owned fully paid for by the customer for 30 days. |
|
|
Term
|
Definition
| Under the jurisdiction of the Federal Reserve Board; deals with the extension of credit by banks and other financial institutions. |
|
|
Term
|
Definition
| The Federal Reserve board requires customers purchasing securities on margin or in a cash account to pay for the securities within 5 business days. Broker/dealers are allowed to waive this regulation in the amount of $1000 or less. |
|
|
Term
|
Definition
| If payment is not received on time, the customer's account is frozen for 90 days; no credit can be extended, but the customer may continue to purchase securities on a cash basis. |
|
|
Term
|
Definition
| these stockholders have preference over common stockholders with respect to dividends or in order of liquidation if the company goes bankrupt; interest rate sensitive. |
|
|
Term
|
Definition
| It can be recalled from the stockholder at the discretion of the issuer. |
|
|
Term
| Liquidations Payout order: |
|
Definition
1. Employees' back wages
2. IRS taxes and penalties
3. Secured bondholders
4. Mortgages and Lien holders
5. Unsecured bondholders
6. Subordinate debentures
7. Preferred stockholders
8. Common stockholders |
|
|
Term
|
Definition
| Represents the maximum dividend that the stock will pay. |
|
|
Term
| Cumulative Preferred Dividend |
|
Definition
| Is a provision that gives the preferred stockholder a better confidence of a dividend being paid, as no dividends can be paid to common stockholders if any preferred dividends are in arrears. |
|
|
Term
|
Definition
| Offers investors potential to receive dividends in addition to the stated dividend. They may "participate" in excess earnings remaining after the company's normal interest and dividend obligations have been met. |
|
|
Term
|
Definition
| Represents the price at which the shareholder may convert to common shares. |
|
|
Term
|
Definition
| Determines the # of shares that will be received for each share of preferred stock and can be calculated by dividing the par value of the preferred stock by the conversion price. |
|
|
Term
| Which of the preferred shares has the highest yield? |
|
Definition
| Straight Preferred - the highest yield is the lowest price. |
|
|
Term
|
Definition
| Are debt securities that represent an investor's loan to the issuer. |
|
|
Term
|
Definition
| On this date, the bondholder receives the principal amount due plus the final interest payment. |
|
|
Term
|
Definition
| Compensation paid to the bondholder for the amount of money borrowed, and is expressed as a percentage; known as the coupon rate. |
|
|
Term
|
Definition
| It is the same as the bond's coupon rate; based solely on the bond's par value, and is not related to the market value of the bond. Represents the income the ivester will receive annually from the issuer. Depends on how the bond is secured and the credit rating of the issuer. |
|
|
Term
|
Definition
| Represents the return on investment by relating the coupon rate to the dollar amount required to purchase the bond. |
|
|
Term
| How to calculate Current Yield: |
|
Definition
| (annual dollar interest paid)/(current market price) x 100 = Current Yield |
|
|
Term
|
Definition
| Expressed as a percentage, is the economic benefit that would be realized on a bond or other fixed income security if the bond was held until maturity date; a rate of return measuring the total performance of a bond. |
|
|
Term
| How to calculate Yield to Maturity: |
|
Definition
| (Annual Interest + Annualized gain)/[(Purchase Price + Redemption price)/2]= Yield to Maturity |
|
|
Term
| Discount Bond (Yield Order) |
|
Definition
| On this bond, the highest yield is the yield-to-maturity, followed by the current yield. |
|
|
Term
| Premium Bond (Yield Order) |
|
Definition
| On this bond, the highest yield is the nominal yield followed by the current yield. The yield-to-maturity is the lowest yield. |
|
|
Term
|
Definition
| On this bond, the nominal yield, current yield and yield-to-maturity are the same. |
|
|
Term
|
Definition
| Investors use duration to measure the volatility of the bond. The higher the duration is, the more its price will drop as interest rates go up. |
|
|
Term
|
Definition
1. Mortgage Bonds
2. Equipment Trust Certificates
3. Collateral Trust Bonds |
|
|
Term
|
Definition
| These bonds are collateralized by a lien or mortgage against real property. |
|
|
Term
| Equipment Trust Certificate |
|
Definition
| These are usually issued by railroads and airlines and are secured by railroad cars and airplanes. |
|
|
Term
|
Definition
| These bonds are issued by corporations that own portions of other companies and can pledge the stock as collateral for a bond issue. |
|
|
Term
|
Definition
| (most common type of bond) These are issues that are not secured by a pledged asset, but secured only by good faith of the issuer. |
|
|
Term
|
Definition
| These have junior claims to assets than that of ordinary debentures or any other secured debt issues of a corporation. |
|
|
Term
|
Definition
| A feature that give the issuer or corporation the flexibility to retire debt prior to maturity. |
|
|
Term
|
Definition
| In order to protect the bondholder, most bonds are not callable for the first 5 to 10 years after issuance. |
|
|
Term
|
Definition
| Allow the holder to exchange or convert bonds in to common shares in the issuing company at a predetermined price. |
|
|
Term
|
Definition
| Determines the number of shares that will be received for each bond. |
|
|
Term
| How to calculate Conversion Ratio: |
|
Definition
| Par Value/Conversion Price = Conversion ratio |
|
|
Term
|
Definition
| A security where ownership can be transferred to another party in a negotiated market; includes Treasury bills, notes, and bonds. |
|
|
Term
| Nonmarketable (Redeemable) Security |
|
Definition
| A security that may only be redeemed by the issuer (examples are Series EE and Series HH savings bonds). |
|
|
Term
|
Definition
| Government-issued short-term obligations with maturities of 1 year or less, discount and non-interest bearing. Come in denominations of $1000. Have maturities of 4 weeds, 13 weeks, 26 weeks, 52 weeks. |
|
|
Term
|
Definition
| They are traded at a discount from the face amount, then mature at their face amount. Non-Interest Bearing Securities. |
|
|
Term
| Non-Interest Bearing Securities |
|
Definition
| Do not pay periodic interest. |
|
|
Term
|
Definition
| The yield denotes the percentage discount from the face value of the issue. |
|
|
Term
|
Definition
| Are issued with maturities of 2 years, 3 years, 5 years, and 10 years. Have coupon rate that pays semi-annually. |
|
|
Term
|
Definition
| Have maturity terms of greater than 10 years at issuance and pay a fixed interest rate that pay semi-annually. Issued in book entry form and with denominations of $1000. |
|
|
Term
|
Definition
| Government entities buy qualified mortgage loans or guarantee pools of such loans originated by financial institutions, then securitize the loans and distribute the securities through the dealer community. |
|
|
Term
| Pass-Throughs (Participation Certificates) |
|
Definition
| Represent a direct ownership interest in a pool of mortgage loans. |
|
|
Term
| Collaterized Mortgage Obligations (CMOs) |
|
Definition
| Are backed by an underlying pool of mortgages, and are issued with varying short, medium, and long-term maturities. |
|
|
Term
|
Definition
| The varying maturities within a pool of mortgages. |
|
|
Term
| Nonmarketable Government Issues |
|
Definition
| Known as U.S. Savings Bonds; cannot be negotiated in the marketplace; their owner must redeem them. |
|
|
Term
| 3 Types of Savings Bonds: |
|
Definition
1. Series EE
2. Series HH
3. Series I |
|
|
Term
|
Definition
| Bonds that are safe, low-risk savings products that are often sold in paper form at financial institutions . They can be purchased at a discount of 50% of their face value ranging from $50 to $10,000. Value of the bond increases monthly, but the interest is compounded semi-annually. |
|
|
Term
|
Definition
| These bonds could be purchased only in exchange for Series EE bonds; as of Sept. 2004, new HH bonds were not available. Come in denominations of $500 to $10,000 at their face value. HH bonds pay current interest income in two semi-annual payments. |
|
|
Term
|
Definition
| These bonds are sold at face value and are available in denominations ranging from $50 to $5,000. The semiannual interest they pay, is made up of a based fixed rate and an inflation indexed rate. They pay interest for 30 years. |
|
|
Term
|
Definition
| These bonds pay no periodic interest. They are purchased at a deep discount from their face value and are redeemed at par on a designated maturity date. |
|
|
Term
| Treasury STRIPS (Separate Trading of Registered Interest and Principal Securities) |
|
Definition
| Financial institutions issued zero-coupon bonds based on U.S. government bond (also known as treasury receipts, treasury zeros, or treasury zero coupons). |
|
|
Term
|
Definition
| Bonds that are issued by states, possessions of United States, cities, counties, districts, and other political subdivides. Two classifications are general obligations bonds and revenue bonds. |
|
|
Term
| General Obligation Bonds (G.O. bonds) |
|
Definition
| Type of municipal bond; can only be issued by those who have the authority to levy and collect taxes. Mostly funded by an "ad valorem tax" and secured by income, gasoline, sales and excise taxes. |
|
|
Term
|
Definition
| A taxed that is based on the assessed value of real estate, and is the main source of local expenditures and debt (G.O. bonds). |
|
|
Term
|
Definition
| A type of municipal bonds that are issued to finance distinct projects. The issuer pledges the revenues and user fees generated by the project in order to support the bond issue; are not backed by taxation. |
|
|
Term
|
Definition
| These bonds are issued but not backed by municipalities; they are supported by a lease agreement with a corporation. |
|
|
Term
| Taxation of Municipal Bonds |
|
Definition
| Interest received is exempt from federal income taxation, but may be subject to state and local taxes. Any capital gains realized from the sales of munis are taxable. |
|
|
Term
|
Definition
| Refers to bonds that are issued by commonwealths, territories, and possessions of the US are exempt from federal, state and local taxation. |
|
|
Term
|
Definition
| The term used for lending, borrowing, and investment of short-term instruments (1 year or less); used by the Federal Reserve, banks, and securities dealers. |
|
|
Term
|
Definition
| Debt instruments that trade in the money market. |
|
|
Term
| Certificates of Deposit (CDS) |
|
Definition
| Commercial banks can borrow funds; are short-term instruments that have maturities ranging from a few weeks to several years. They are considered safe because secured by the general credit of the issuing bank; minimum denomination of $100,000. |
|
|
Term
|
Definition
| Is a short-term debt instrument issued by highly rated corporations and has a maximum maturity of 270 days. Not collaterized, but backed by good faith and credit of the corp. Purchased at a discount and redeemed at par. |
|
|
Term
|
Definition
| Are checks made payable at a specific future date drawn on and accepted by a bank; used to provide a means of payment for merchandise in import and export transactions. Extremely safe because are backed by the bank and the merchandise purchased. |
|
|
Term
|
Definition
| Are the sale of securities with an agreement for the seller to buy them back on a later date, at an agreed price; frequently used by the Federal Reserve and other financial institutions. |
|
|
Term
| Municipal Money Market Instruments |
|
Definition
| Are short-term debt instruments that are paid back with a municipality's future tax collection. |
|
|
Term
|
Definition
| During periods of economic expansion, the demand for goods and services overtakes supply and prices rise. |
|
|
Term
|
Definition
| A continued recession causes employers to lay off workers, and prices fall. |
|
|
Term
|
Definition
| A method through which the government attempts to maintain a stable economy by the usage of taxation and expenditure programs. The focus is stable economic growth and high levels of employment. |
|
|
Term
|
Definition
| Attempts to control the supply of money and credit in the economy. The focus is to control inflation. |
|
|
Term
| Duties of the Federal Reserve: |
|
Definition
| 1.)Conducting the nation's monetary policy.2) Supervising and regulating banks and other depository instit.3)Maintaining the stability of the financial system.4) Providing certain financial services to the U.S. government, the public, financial institut., and foreign official institut. |
|
|
Term
|
Definition
| Economic measure that is used by the Federal Reserve; is a percentage of the members banks' deposits that are required to be placed in the Federal Reserve Bank. |
|
|
Term
|
Definition
| The rate that one bank charges another bank for short-term money; it is the average of all federal funds across the country and is not set by the Federal Reserve Board. |
|
|
Term
|
Definition
| The rate that individual banks charge their most credit-worthy commercial borrowers for unsecured loans. |
|
|
Term
|
Definition
| The rate that banks charge broker/dealers for money that they lend to margin account investors. |
|
|
Term
|
Definition
| The rate banks are charged for borrowing funds from the Fed. |
|
|
Term
|
Definition
| The risk that the issuer may not be able to meet interest or principal payments on fixed income securities; usually managed with a long-term focus. |
|
|
Term
|
Definition
| Risk associated with the fluctuations of interest rates; the threat of suffering a loss due to a change in the interest rate. |
|
|
Term
| Purchasing Power Risk (Inflation Risk) |
|
Definition
| As inflation causes money to decrease in value, purchasing power shrinks. |
|
|
Term
|
Definition
| The risk that an investor may sustain a loss if a security must be liquidated. |
|
|
Term
|
Definition
| The risk that upon maturity, if interest rates have fallen, the income produced by the currently available bond yields may be much less. |
|
|
Term
|
Definition
| The risk that changes in tax laws could adversely affect the potential net profitability of an investment. |
|
|
Term
|
Definition
| Is exposure to the uncertain future market value of a portfolio based on changes in investor sentiment and the resulting movement of the overall securities market. |
|
|
Term
| Social and Political Risk |
|
Definition
| The risk that a particular investment may fall out of social or political favor and may become obsolete or less profitable. |
|
|
Term
|
Definition
| The risk that foreign investments, such as international stocks and American Depository Receipts, may be greatly affected by large movements in currency exchange rates. |
|
|
Term
|
Definition
| This concept suggest that investments involving greater risk will often product a greater reward. |
|
|
Term
|
Definition
| The amount of degree of a securities fluctuation. |
|
|
Term
|
Definition
| Refers to industries that are likely to perform steadily, in spite of changes in the economic cycle. |
|
|
Term
|
Definition
| Do not react to changes in the economy. |
|
|
Term
|
Definition
| Closely tied to the economic cycle. |
|
|
Term
|
Definition
| A portfolio that contains various investment vehicles and/or asset claims. |
|
|
Term
|
Definition
| One holding an aggressive strategy invests in securities or instruments seeking long-term appreciation of principal without the fear of it fluctuating in the short-term. |
|
|
Term
|
Definition
- Income & Expenses
- Discretionary Income
- Assets and Liabilities
- Liquid Assets
- Insurance Needs
- Participation in Retirement Programs
- Participation in Benefit Plans
- Tax Status |
|
|
Term
|
Definition
| This investment objective refers to the investor's desire for liquidity and safety of principal; protection against the loss of invested principal. |
|
|
Term
|
Definition
| Means income "now" as opposed to in the future; translates to investments with a current yield. |
|
|
Term
| Growth of Invested Capital |
|
Definition
| Investors with longer investment horizons and a need for growth of invested capital are better suited for a portfolio based on equities. |
|
|
Term
|
Definition
| The degree of uncertainty that investors can tolerate with regard to a negative change in the value of their portfolio. |
|
|
Term
| Asset Allocation Questionnaire |
|
Definition
| The most common way to determine a client's risk tolerance. |
|
|
