Glossary of Securites Series 6
Other Decks By This User
- What is primarily a market for corporate securities?
- Stock Market
- What are the two basics ways a corporation raises money?
- 1. Debt Securities (Bonds)
2. Equity Securities (Stock)
- The two methods of raising capital is appropiately called
- Equity Securities is also known as__________
Debt Securities is known as
- 1. Equity Capital
2. Debt Capital
- What does the net worth or stockholders equity consist of
- equity capital (preferred and common stocks) plus the retained earnings
- What are the profits that the corporation makes on the sale of its product or services that has not been distributed as dividends called
- retained earnings or earned surplus
- Name of the legal entity comprised of a volumtary association of person organizd under the corporate laws of the state called
- What is a unit of corporate ownership
- What does a corporation operate under?
- charter granted by the state
- What are the corporates financial obligations in order?
- 1. bond holders
2. general creditors
3. preferred stockholders
4. common stockholders
- What are the two types of voting that a corporation offers common stockholders?
- 1. statutory voting
2. cumulative voting
- A shareholder's right to purchase newly issued shares (before public offering)
- pre-emptive rights
- The maximum number of shares permitted by the State Secretary to be issued by a newly chartered corportation.
- Authorized Shares
- The portion of the authorized stock that is actually sold to investors.
- Issued Shares
- The portion of authorized stock that has not yet been issued or sold
- Unissued Shares
- What is the name of shares that is issued in the charter of the corporation?
- authorized shares
- What indicates the total value of the shares of a company?
- Market Capitalization
- How do you determine the market capitalization of a company?
- Multiply the current price of shares of the common stock by the number of shares outstanding
- Name for market capitalization exceeding $5 billion.
- Large Cap
- Name for market capitalization between $1 and $5 billion
- Mid Cap
- Name for market capitalization under $1 billion
- Small Cap
- What is the stock called when a corporation re-acquires or buy back common stock which is then owned by the corp?
- Treasury Stock
- What stock does not have voting rights, does not receive dividends and not considered to be outstanding?
- Treasury Stock
- What is the arbitrary value palced on common stock at the time the stock is authorized?
- Par Value
- Name of the stock that is carried at a Stated Value on the corporations financial records.
- No Par Stock
- A receipt evidencing shares of a foreign corporation held on deposit or under the control of a U.S. Banking institiution.
- American Depositary Receipt (ADR)
- A shareholders right to purchase newly issued shares so that the owner can maintain proportionate interest.
- Pre-emptive right
- A security issued by some corporations giving the holder the right to purchase new shares at a stipulated price.
- name of a contract to buy 100 shares of stock for a specified price and a specified time period
- a call option
- name of a contract to sell 100 shares of stock for a specified price and a specified time period
- a put option
- a 100 shares of stock is referred to as ___________.
anything less to called_____
- 1. round lot
2. odd lot
- The term used that means the purchasers have to sign a letter attesting that they agree to hold the stock at least one year before reselling it in the open market.
- The distribution of unregistered securities to a limited number of purchasers without the filing of a registration statement with the SEC.
- private placement
- An individual or corporation that purchased an unregistered security and offers it in a public distribution without an effective registration statement is called a
- Statutory Underwriter
Penalty-fine and/or prison
- When a coporation declares that stockholder will have twice as many shares for half the value what is this called?
- Stock Split
- Owners of this kind of stock entitled to a fixed dividend to be paid regularly before dividends can be paid on common stock. They also have claims to assets and no voice in management>
- Preferred Stock
- Order of obligation for a corporation.
preferred stock dividends
common stock dividends
- What is the name of the Preferred stock issue that allows for the accumulation of any dividends not paid in prior years due to insufficient earnings. Note this dividend will be paid in full before the common stock in paid. Dividends called.
- 1. Cumulative preferred
2. Cumulative dividends
- Which stock allows the preferred stock to be exchanged for a fixed number of common stock shares ?
- Convertible preferred stock
- Which stock fluctuates in value and therefore is used for growth, common or preferred?
- Common stock
- Which stock is tied to a fixed dividend rate and is primarily bought for income,
common or preferred?
- Name for a feature which permits the corporation to redeem (buy back) its preferred stock at a fixed price?
- In the callable feature the price the issuing corporation may elect to pay for the shares is stated on the stock certificate and is called the
- call price
- Name the preferred stock that in addition to a stated fixed dividend is also eligible to participate in the common stock dividend.
- Participating preferred stock
- A preferred stock can have more than one class, the one in first position is called
- first claim preferred or prior preferred
- An agent of a coproration responsible for the registration of shareowner' names on the company records and the proper re-registration of new owners when a transfer of stock occurs
- transfer agent
- How is Equity capital raised?
- Through the issurance of stocks
- Which stock has a prior claim on assets and earnings and has a fixed dividend?
- Preferred stock
- name the three options you might find with preferred stock
- 1. cumulative
- name of the certificate representing the corporations indebtedness to an investor.
- This largest issuer of debt securities is
- United States Goverment
- Bond issues from state and local political entities are called
- municipal bonds
- Money borrowed through a bond issue for a minimum period of five years is called
- long-term debt or funded debt
- When the term goverment is used it is referring to _____.
When the term municipal security is used it is referring to ___________.
- 1. Federal Goverment
2. State or municipality
- IN goverment issues the face amount or par value is what?
- True or False Corporate debt securities can either be secured or unsecured.
- Unsecured debt securities are backed by what?
- reputation, credit record and financial stability
- Corporation, particularly railroads and other transportation companies finance the acquistion of their rolling stock (locomotives) by issuing what?
- equipment trust certificate
- How does an Equipment Trust Certificate differ from any other bond isssue ?
- A portion of the loan is paid off annually because the object securing the debt depreciates.
- What is the name of the bond in which the corporation deposits securities it owns into a trust to serve as collateral for lenders?
- Collateral trust bond
- An unsecured long-term debt offering by a coporation, with a written promise to pay and are not secured by anything but general credit of corp.
- Which has a senior claim secured or unsecured bonds?
- Which debt security has a subordinate claim?
- Debenture but is still before stockholders
- Name the bond which is secured by the full faith and credit of an issuer with taxing power
- General Obligation Bond (GO Bond)
- Name a bond which is payable from the earnings of income producing enterprise such as water,sewer electric, toll bridge
- Revenue bond
- Which pays a higher yield, General obiligation or revenue? Why?
- Revenue, because more risks, taxes are more secure than revenues
- The financ for the construction of a manufacturing or commerical facility for the benefit of a private user can be done through
- Industrial revenue bonds
- Name the two types of government backings.
- 1. direct -gov't guarantee
2. moral- federal agencies
- What do you call a security that can not be traded?
- 4 facts to know about
Series EE and HH Savings bonds
- 1.not marketable
2.always in registered form
3.Series EE purchased at
4.Series HH are isssued at
par and pay semi-annual int.
- Name a short term debt obiligation of the U.S. Goverment
- Treasury Bills
- Name a debt obiligation that is issued weekly, pay no interest and are issued at discount from par value,highly liquid and offered in book entry form
- Treasury Bills
- A federal obligation with maturities of up to 10 years, carrying a fixed rate of interest and are issued, quoted and traded as a percentage of their face value
- Treasury notes
- Name two debt securities that are considered moral obligations of the US Goverment
- Federal Farm Credit Banks
Federal Home Loan Banks
- Interest received by investors on securities with the farm credit banks and Federal home loan banks are exempt from paying what taxes?
- state and local taxes
- Name the two types of goverment agency mortgage backed securities.
- 1.Federal National mortgage Association (Fannie Mae)
2. Goverment National Mortgage Association (Ginnie Mae)
- a publicly owned, goverment-sponsored corporation that purchases and selle mortgages issued by the Federal Housing Administration (FHA) or Veterans Addministration(VA)
- Federal National Mortgage Association (Fannie Mae)
- A wholly owned government corporation operated by the Department of Housing and Urban Development that provides primary mortgages through bond issuances. a very safe security that pays principal and interest monthly
- Goverment National Mortgage Association (Ginnie Mae GNMA)
- Name the two primary rating organizations for debt securities
- 1. Standard & Poor's
best rating AAA orAaa
- Name a commodity that is subject to supply and demand
- The cost of money is determined by supply and demand and the measurement of supply and demand is called
- Prime rate
- Interest on municipal bonds are tax exempt on which tax
- federal income tax
- What is the equation for taxable-equivalent yield?
- tax-free yield divided by (100% minus the tax bracket)
- The annual interest rate payable on a bond, specified in the indenture and printed on the face of the certificate itselt
- coupon rate
- What is the equation for return on investment
- return divided by investment
(current market price)
- DBL 10s 09 means what?
- DBl name of issuer
10 is the nominal yield
2 pays interest semi-annual
09 matures in 2009
- When a bond is selling at a price above par we say it is selling at what?
- When a bond is selling at a price below par we say it is selling at what?
- Two critical statements to remember about what bonds sell for
- 1. if you pay more, you get less
2. if you pay less, you get more
- What is the most important relationship between interest rates and bond prices?
- They move in opposite directions.
- The current market price of bonds is determined by what?
- supply and demand
- What is the name for bond issues with only one maturity date?
- Term bonds
- What is the name for bond issued that have multiple maturity dates?
- Serial bonds
- A bond feature , by which all or part of an issue may be redeemed by the corporation before maturity and under certain specified conditions.
- What is the term used to describe refinancing in the bond business, through callable feature?
- What is setup so that Callable bonds allow the issuer to allocate a portion of its earnings to a special escrow account in order to keep retiring a portion of its debt on a regular basis
- sinking fund
- Convertible bonds are only issued by who?
- Bonds that can be converted or exchanged for the company's common stock is called
- convertible bonds
- Most convertibles are what kind of debt
- How do corporations raise capital?
- Issuing debt and equity securities
- How does the goverment raise capital?
- Borrowing through bond issues
- How do Treasury notes and Treasury bonds that are in their last year prior to maturity treated?
- They trade like any security with one year or less
- What are short-term IOUs issued by corporations called?
What is the denomination?
- Commerical Paper
- What is used to finance import/export businesses and used extensively in international trade?
- Bankers Acceptance
- A bankers acceptance is a negotiable instrument that is backed by what three things:
- 1. American Importers pledge
2. goods being imported
3. guarantee of the accepting bank
- A debt obligation backed by a pool of mortgages and usually have a passed through feature is called
- mortgage backed securities
- This entity is comprised of qualified conventional residential mortgages on single-family homes and are not backed by the goverment
- Federal Home Mortgage Corporation (Freddie Mac)
- Which has the lowest yield
Freddie Mac, Ginnie Mae or Fannie Mae
- Ginnie Mae, backed by the Goverment
- Bonds that are collateralized by mortgages or by mortgage backed securities and have a set date to mature are called
- collateralized mortgage obligations (CMO)
- An entity that holds a fixed pool of mortgages and issues multiple classes of intersts in itself to investors is called
- REal Estate Mortgage Investment Conduits (REMIC)
- What are the two classes of interest for Real Estate Mortgage Investment Conduits?
- regular interest
- Interest in the REMIC are fixed and entitles the holder to a specified principal amount is called
- regular interest
whether issued as stock or debt payments treated as interest income
- What type of interest does regular interest in a REMIC receive?
- Fixed (similar to preferred stock)
- What type of interest does residual interest in a REMIC receive?
- variable ( similar to common stock) all income is considered income
- Interest in a REMIC may be issued in the form of what two ways?
- stocks or debt
- name for firms which sell new securities to the general public
- investment bankers
- a broker/dealer organization that provides a service to industry through counseling, and ,underwriting of securties
- investment banker also known as underwriter
- Two types of underwriting a sale for securities is called
- firm commitment
- An agreement stating the investment banker agrees to supply the corporation with a specified amount of money for the securities with the intention of reselling them
- firm commitment
- The investment banker makes tries to sell the securities acting on behalf of the issuer
- best effort
- The first time a corporation is making a public offering this is called
- Initial public offering(IPO)
- Anytime authorized, but unissed stock is offered by the corp.it is raising additional equity capital this is
- public offering
- the selling of a large block of outstanding stock that was previously issued and is now being re-sold by investors is called
- secondary offering
- When a corporation makes a public offering of its stock, it is bound by what provision?
What is its nickname?
- Securities Act of 1933
Act of Full Disclosure
- Before a security can be offered to the public a full disclosure of all pertinent acts must be filed with the SEC, name of document filed?
- Registration statment
- From the filing date of the registration statement how many days until the effective date? What is this period called?
- 20 days
- What is the purpose of the registration statement?
- For the SEC to review info and make sure full disclosure has been made. SEC does not approve the issue.
- Who submits the registration statement?
- the investment banking firm which is acting as an advisor to the corporation
- A preliminary prospectus for securities to be offered to publicly by a corp. or underwriter before the effective date of the registration statement called
- Red Herring
- What two items are missing from the red herring?
- 1. public offering price
2. effective date of the issue
- If a prospect who has reviewed the red herring is interested in purchasing the security he will give you what?
- indication of interest, no order can be accepted before effective date of issue
- Close to the end of the cooling-off period, a meeting is held between the underwriter and corp. to discuss any amendments necessary to complete the registration statement , what is the name of the meeting?
- due Diligence meeting
- Once the effective date of issue has been reached and sales may be executed name the prospectus that is given.
- Final or statutory prospectus
- What is the name for a group of investment bankers, that are collectively underwriting a large dollar security as a firm commitment, so this distributes the risk.
- Name of an ad that contains only the key facts to the issue, name, issuer, # of shares, price, name of snydicate
- tombstone ad
- Broker/dealers who contract to act as selling agents for underwriters and who are compensated by a portion of the selling concessions on newly issued stocks, they assume no financial liability to the issuer, this group is called
- selling group
- An agreement between an investment banker and corp., whereby the banker agrees, for a negotiated fee to purchase any or all shares offered as a subscription privilege that are not bought by the rights holders by the time the offer expires this is called
- stand-by underwriting agreement
- Name of one who buys or sells securities for the account and risk of someone else and charges a commission for services rendered is called
- agent or broker
- An individual or firm in the securities business acting as a principal rather than as an agent. They earn their profit from mark-up and mark-down, never commission is called
- in which of the underwriting types does the investment banking firm act as an agent?
- Best efforts underwriting
- In which of the underwriting types does the investment banking firm act as a principal?
- firm commitment
- SEcurities that are not required to be registered with the SEC prior to sale are called______
- exempt securities
1. any security issued by federal, state or local goverment
2. commerical paper with maturity less than 9 months
3. Private placements (less that 35 public investors
4. Intra-state offerings
- One in a position of trust is called
- Regulations of investments made by fiduciaries are regulated by who?
- State laws
- First written in 1992, it deals with investments made by fiduciaries and holds them to standards and good judgements when investing money for others, also investments in modern portfolio theory, this is called
- Prudent investor rule
- The process of how securities are issued to the public is known as
- Primary market refers to the issuing of what
- new securities
- The resale of outstanding securities is known as
- secondary market
- the occurence everyday on the exchange and in the OTC market is known as the
- secondary market
- The two market places for secondary trading are known as
- What protects the investor who purchases in the secondary market?
- Securities Exchange Act of 1934
- What created the Securities and Exchange Commission?
- Securities Exchange Act of 19634
- What provides liquidity to individuals who acquired securities in the primary market?
- Secondary market
- What is a private assocition of brokers that provides a central meeting place for its member brokers?
- stock exchange
- What determines the price of particular stock will sell at?
This is determined at a free and open_______
- supply and demand
- What are the two National stock exchanges called?
- New York Stock Exchange(NYSE)
American Stock Exchange (AMEX)
- Beside the two National stock exchanges there are several other stock exchanges referred to as
- regional stock exchange
- Stocks that are traded on an exchange are referred to as
- listed stock
- The person who conducts an auction is called
- Securities are bought and sold in two general types of markets what are they called
- stock exchange
- Companies which have applied and qualified for trading can be bought and sold on this market
- stock exchange
- This market handles the buying and selling of securities that have not applied and qualified for trading
- There is no central marketplace, or trading floor for these over the counter securities and it is composed of thousands of brokers and dealer making security transactions it is called
- negotiated market
- What is the largest market in term of number of securities issues traded?
- Name 5 types of securities traded over-the-counter
- 1. goverment bonds
2. municipal bonds
3. mutual funds
4. new issues(primary Dist)
5. variable annuities
- An NASD broker/dealer ready to provide continuing bids and offers for a given security in the secondary market is called
- market maker
- Name the voluntary association of broker/dealers in over-the-counter securities
- National Association of Securities Dealers
- An electronic data terminal device furnishing subscribers with instant indentification of market-makers and current quotations is called
- Nasdaq--Nation Association of Securities Dealers Automated Quotations
- The prices shown on the NASDAQ in which the market maker is ready to do business with another NASD member firm
- firm quote
- This service in available on the representative's desk top and provides price information only on the hightest bid and lowest offer(subject quote), nothing else is given.
- Nasdaq level 1
- This service provides a large CRT(Television screen) tht shows firm bid and ask right now and size of their market, could get firm quote
- Nasdaq level2
- This service allow registered market makers to enter bid and ask price (quotes)and report their trades.
- Nasdaq level 3
- How much is a round lot?
- 1oo shares
- The failure to honor a firm quote is known as
- Backing away
- A trade of a listed stock that occurs over-the-counter is known as
- Nasdaq Intermarket
- A private transaction made directly between large institutional investors, such as banks, mutual funds, and insurance companies without the use of a securities firm is called
- Fourth Market
- Can a securities firm act as a broker and a dealer in the same transaction?
- A Securities firm maintaining an inventory in a particular security would be acting as a
- The most frequently used delivery contract that calls for delivery on the third business day after the trade.
- Regular way
- One exception to the 3 day Regular Way delivery is U.S. Goverment securities that must be delivered when
- next business after the trade
- Name a non-regular way delivery is which the delivery is made at the office of the purchaser on the same day as the trade
- cash trade
- Name four dates in chronological sequence regarding dividends
- 1. declaration date
2. ex-dividend date
3. record date
4. payment date
- The day the Board of directors publicly announce a divideng is called
- Declaration date
- This is the day on and after which the buyer of a security is not entitled to a previously declared dividend ,usually the 2nd business day priort to the record date is called
- ex-dividend date
- This is the day the corporation (usually the transfer agent) makes a list of stockholders of record this is called
- record date
- This is the actual day payment of the dividend is made
- payment date
- The standard unit of trading in stock is
- 100 shares
- Taxes on money you make is commonly called
- income taxes
- Higher levels of taxable income are taxed at progressively higher tax rates this is called
- tax brackets
- Name two ways one makes money from investing in securities
- 1. dividends and interest
2. profit from sale of investments
- Dividends and interest received from investments is called
- Investment income
- Profit on the sale of investments is called
- capital gains
- all interest received (other thatn municipal securities) are taxed as
- ordinary income
- dividends received from common stock are taxed as
- long term capital gains
- When the value of your shares rise this is called appreciation is it taxable?
- No, the rise in value is paper profit until you sell it
- When you sell shares for a profit you now havea
- realized capital gains
- The IRS has two separate categories of capital gains and losses, they are called
- 1. long-term capital gains
2. short-term capital gains
- What determines which category a capital gains qualifies for?
- holding period
- If securities are sold which have been held for a period of 12 months or less, the profit realized is
- short-term capital gains
- If securities sold at a profit were held one day and 12 months or longer that profit is deemed
- Long-term capital gains
- Short-term gains are taxed at
- ordinary tax bracket
- What is the maximum write-off for capital losses per year?
- $3,000 with a carry over against gains, if no gains then deducted from orindary income
- The date of acquisition to determine long-term status is
- trade date not settlement date
- What is the maximum capital gains tax
- The rules that says an investor may not earn a tax benefit from selling a security at a loss if he reaquires that secuirty or one identical to it within a 30 day period before or after the sale is called
- Wash Sale Rule
- The IRS allows a gift tax exclusion per person per year in the amount of
- The recipent of a tax free gift is called
Does he have a tax liability for the gift
- How is interest from U.S. Goverment bonds treated for tax purposes
- Interest is exempt for state income tax not federal
- Interest received on state or municipal security are subject to what taxes?
- Interest is exempt for federal but must be paid on state
- The entire process of estimating return and risk for individual securities is known as
- securities analysis
- With stocks the two basic types of risk are known as
- market risk
- The risk that the business in which you have invested your money does poorly or goes bankrupt is called
- business or financil risk
- name the three risks involved in the purchase of bonds
- 1. credit risk
2. money risk (interest rate)
3. purchasing power risk (inflation risk)
- What is the name for an issued that makes money basically in bad and good times?
- defensive issue
- The uncertainty that an investor made need to liquidate that stock at a time that would not be advantageous , such as taking a loss because the price has decreased is called
- risk of liquidating the investment
- A risk in that when the investor is willing to sell the security there may not be a buyer is referred to as
- Marketability or redeemability
- What securities have almost no marketability risk?
Which ones have no marketability risk?
- publicly trade stock and bonds
mutual funds have no risk
- An investor who is looking for a portfolio whose objectives are maximum income , liquidity and safety of principal may choose what?
- money market
- How does the Federal Reserve respond to economic cycles?
- By buying and selling Treasury securities and/or changing interest rates
- to increase the money supply(inflationary policy) the Federal REserve would do what?
- Buy Treasury securities, putting more money into circulation
- The interest rate member banks pay to borrow from the Federal REserve is called
- discount rate
- A company that makes investments on behalf of individuals who share common financial goals is called
- mutual funds is an investment company
- What conducts an ongoing or continouse offering of new shares?
- Mutual funds
- What do you call a mutual fund whose stated objective is long-term growth of capital?
- growth fund
- What do you call a mutual fund whose stated objective is to provide a higher that average current investment return?
- income fund
- A fund which seed to achieve their objectives through concentrating their investments within a single industry are called
- specialized funds
- Which fund is suitable for the investor who wants to preserve his origianl principal while at the same time making modest income and gain is called
- BALANCE FUNDS
- Which fund would an investor use whose main objective to tax-exempt income called
- municipal bond funds
- A corporation whose primary business is to sell its advisory services and professional expertise to mutual funds is called
- money managers or mangement company
- In a mutual fund who handles bookkeeping, periodic reports, and other clerical functions is called
- A principal underwriter is also known as
- Distributor or sponsor
- What three methods can an investor use to buy shares of applicable mutual funds?
- 1.fund to underwriter to
dealer to investor
2.fund to underwriter to
3.fund to investor
- How often must a 12b-1 fee be reviewed and who is it approved by?
40% vote of outside directors
- How is net worth figured?
- subtracting toatl liabilities from total assets
- How is working capital calculated?
- subtracting current liabilities from current assets
You must Login or Register to add cards