Chapter 9 Personal FInance
stop order
A type of limit order to sell a particular stock at the next available opportunity after its market price reaches a specified amount.
securities
All of the investments, including stocks, bonds, mutual funds, options, and commodities, that are traded--bought and sold--on securities exchanges or the over-the-counter market
portfolio
All securities held by and investor
limit order
A request to buy or sell a stock at a specified price.
market order
A request to buy or sell a stock at the current market value.
par value
An assigned (and often random) dollar value that is printed on a stock certificate.
preemptive right
The right of current stockholders to buy any new stock that a corporation issues before the stock is offered to the general public.
initial public offering (IPO)
The sale of stock by a company to the general public for the first time.
large cap stock
The stock of a corporation that has issued a large number of shares of stock and has a large amount of capitalization.
earnings per share
A corporations net, or after tax, earnings divided by the number of outstanding shares of common stock.
round lot
100 shares or multiples of 100 shares of a particular stock.
total return
A calculation that includes the annual dividend as well as any increase or decrease in the original purchase price of the investment.
public corporation
A corporation that sells its shares openly in stock markets, where anyone can bu them; also called a publicly held corporation.
private corporation
A corporation whose shares are owned by a relatively small group of people and are not traded openly in stock markets; also called a closely held corporation.
proxy
A document that transfers a stockholder's voting rights to someone else.
commission
A fee charged by a brokerage firm
account executive
A licensed individual who buys or sells securities for clients; stockbroker.
secondary market
A market for existing financial securities that are currently traded among investors.
primary market
A market in which an investor purchases securities from a corporation through an investment bank or some other representative of the corporation.
securities exchange
A market place where brokers who represent investors meet to buy and sell securities.
over the counter market (OTC)
A network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange.
stock split
A process in which the shares of stock owned by existing stockholders are divided into a larger number of shares.
odd lot
A quantity of fewer than 100 shares of a stock.
small cap stock
A stock issued by a company with a capitalization of $150 million or less/
growth stock
A stock issued by a corporation whose potential earnings may be higher than the average earnings predicted for all the firms in the country. Stocks issued by these corporations generally do not pay dividends.
blue-chip stock
A stock that is considered a safe investment and generally attracts conservative investors.
income stock
A stock that pays higher-than-average dividends compared to other stock issues.
defensive stock
A stock that remains stable during periods of economic decline.
penny stock
A stock that typically sells for less than $1 a share, although it can sell for as much as $10 a share.
cyclical stock
A stock whose market value tends to reflect the state of the economy.
selling short
Selling a stock that has been borrowed from a brokerage firm and that must be replaced at a later date.
bull market
Situation that occurs when investors are optimistic about the economy and buy stocks, causing the value of many stocks and the value of the stock market as a whole to increase.
bear market
Situation that occurs when investors are pessimistic about the economy and sell stocks, causing the value of individual stocks and the stock market as a whole to decrease.
current yield
The annual dividend paid by and investment divided my the investment's current market value, expressed as a percentage.
price earnings (PE) ratio
The price of one share divided by the corporations earnings per share of stock outstanding over the last 12 months.
capitalization
The total amount of stocks and bonds issued by a corporation.