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Section 2 Terms

Terms in this set (39)

Conversion price
the price at which a convertible bond or other convertible stock can be exchanged for shares of common stock
Conversion ratio
a ratio specifying the number of shares of common stock into which a convertible bond can be converted
Debentures
unsecured bonds backed only by the credit worthiness of the bond issuer
Debt instruments
methods of financing debt/raising capital, including simple loans, discount bonds, coupon bonds, and fixed payment loans
Dividend
The portion of corporate profits paid out to stockholders
Leverage
the use of borrowed money or debt to supplement existing funds for purposes of investment
Liabilites
A company's financial obligations, such as money out to lenders, suppliers and employees
Liquidation
When a company sells its assets to dissolve the business
Proxy voting
a grant of authority by a shareholder allowing another individual to vote his or her shares
Public offering price (POP)
The price of a new issue of securities at the time the issue is first offered to the public
Retained earnings
An amount earned by a corporation and not yet distributed to shareholders
Subscription price
Price at which existing shareholders of a corporation are entitled to purchase common stock in a RIGHTS OFFERING.
Ad valorem tax
Tax imposed on the value of property
Book entry
A method of registering securities. There is no physical certificate, as evidence of ownership is reflected by an entry recorded on the electronic books of the issuer
Callable bond
a bond that the issuer has the right to pay off before its maturity date
CMO (collateralized mortgage obligation)
a type of mortgage-backed security that contains a pool of mortgages bundled together and sold as an investment
Covenant
A binding agreement or guarantee
Derivative Securities
securities that derive their value depending on the values of other assets and include options, futures, and forward contracts
Indenture
a formal legal agreement, contract, or document, in particular.
Investment-grade bonds
bonds that are issued by financially stable companies or municipalities and have a relatively low risk of default
Nominal yield
the interest rate, also known as the "coupon rate" which is named on the bond certificate
Par value
The face value of a bond or preferred stock
Bearish
Pessimistic market sentiment characterized by a belief that a security, market sector, or the overall market will fall
Bullish
Optimistic market sentiment characterized by a belief that a security, market sector, or the overall market will rise
Derivative
A financial contract that derives its value from the value of another asset.
Discretionary account
An account in which the customer has given the registered representative authority to enter transactions at the representative's discretion.
Intrinsic value
An estimate of a stock's "true" value based on accurate risk and return data. The intrinsic value can be estimated but not measured precisely.
Discount
A price below par (A bond selling below its par value)
Diversification
Portfolio strategy that seeks to minimize risk by spreading investments over different securities, industry sectors, and asset classes
Maturity date
The final payment date on a bond when interest and principal are repaid by the borrower
No-load funds
Mutual funds sold without a commission or sales charge
Portfolio
A collection of financial assets owned by an individual or managed by financial institutions
Premium
A price above par (a bond selling above its par value)
REMIC
real estate mortgage investment conduit. A type of mortgage-backed security.
After-tax dollars
Income after all taxes are deducted
Liquidity
Ease with which an asset can be converted into cash quickly
Syndicate
A group of underwriters that is formed to distribute an issue of securities to the public
Trade ticket
The original record that documents a buy or sale transaction.
Volatility
Indicates how much and how quickly the value of an investment, market, or market sector changes.
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