FIN-220 CH 6, 7
a bond's coupon payment dividend by its closing price
current yield
an agent who buys and sells securities from inventory
dealer
unsecured debt, usually with a maturity of under 10 years
debenture
the portion of a nominal interest rate or bond yield that represents compensation for the possibility of default
default risk premium
bond call provision prohibiting the company from redeeming the bond prior to a certain date
deferred call provision
NYSE members who act as dealers in particular stocks. Formerly known as "specialists"
designated market makers (DMMs)
the price of a bond including accrued interest. Also known as the full or invoice price. This is the price the buyer actually pays
dirty price
payments by a corporation to shareholders, made in either cash or stock
dividend
a model that determines the current price of a stock as its dividend next period dividend by the discount rate less the dividend growth rate
dividend growth model
a stock's expected cash dividend divided by its current price
dividend yield
websites that allow investors to trade directly with one another
electronic communications networks
the principal amount of a bond that is repaid at the end of the term.
face value
the relationship among nominal returns, real returns, and inflation
fisher effect
NYSE members who execute customer buy and sell orders
floor brokers
the written agreement between the corporation and the lender detailing the terms of the debt issue
indenture
the portion of a nominal interest rate that represents compensation for expected future inflation
inflation premium
the highest bid quotes and the lowest ask quotes for a security
inside quotes
the compensation investors demand for bearing interest rate risk
interest rate risk premium
stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights
preferred stock
the market in which new securities are originally sold to investors
primary market
a part of the indenture limiting certain actions that might be taken during the term of the loan, usually to protect the lender's interest
protective covenant
a grant of authority by a shareholder allowing another individual to vote his or her shares
proxy
interest rates or rates of return that have been adjusted for inflation
real rates
the registrar of a company records who owns each bond, and bond payments are made directly to the owner of record
registered form
the market in which previously issued securities are traded among investors
secondary market
an account managed by the bond trustee for early bond redemption
sinking fund
a procedure in which a shareholder may cast all votes for each member of the board of directors
straight voting
Investment firms that are active participants in stocks assigned to them. Their job is to make a one-sided market (i.e., offering to either buy or sell). They trade purely for their own accounts.
supplemental liquidity providers (SLPs)
the portion of a nominal interest rate or bond yield that represents compensation for unfavorable tax status
taxability premium
the relationship between nominal interest rates on default-free, pure discount securities. and time to maturity; that is, the pure time value of money
term structure of interest rates
a fixed place on the exchange floor where the DMM operates
DMM's post
a procedure in which a shareholder may cast all votes for one member of the board of directors
cumulative voting
the price a dealer is willing to take for a security
asked price
a bond issued without record of the owner's name; payment is made to whomever holds the bond
bearer form
the price a dealer is willing to pay for a security
bid price
the difference between the bid price and the asked price
bid-ask spread
an agent who arranges security transactions among investors
broker
the amount by which the call price exceeds the par value of the bond
call premium
bond during period in which it cannot be redeemed by the issuer
call protected bond
agreement giving the issuer the option to repurchase a bond at a specific price prior to maturity
call provision
the dividend growth rate, or the rate at which the value of an investment grows
capital gains yield
the price of a bond net of accrued interest; this is the price that is typically quoted
clean price
equity without priority for dividends or in bankruptcy
common stock
the stated interest payment made on a bond
coupon
the annual coupon divided by the face value of a bond
coupon rate
the portion of a nominal interest rate or bond yield that represents compensation for lack of liquidity
liquidity premium
specified date on which the principal amount of a bond is paid
maturity
as of 2006, a member is the owner of a trading license on the NYSE
member
interest rates or rates of return that have not been adjusted for inflation
nominal rates
the flow of customer orders to buy and sell securities
order flow
the principal amount of a bond that is repaid at the end of the term
par value
a plot of the yields on treasury notes and bonds relative to maturity
treasury yield curve
the rate required in the market on a bond
yield to maturity
a bond that makes no coupon payments, and thus is initially priced at a deep discount
zero coupon bond