Investments Final Exam
puts and calls
(UWS C5) Put - a contract to sell shares at a definite price within a specified time limit Calls - a contract to buy shares at a definite price within a specified time limit
mortgage bonds
A bond secured by a mortgage on one or more assets, typically backed by real estate holdings or by property.
preferred stock
A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Preferred stock generally has a dividend that must be paid out before dividends to common stockholders and the shares usually do not have voting rights.
NASDAQ
A computerized system that facilitates trading and provides price quotations on more than 5,000 of the more actively traded over the counter stocks
stock split
A corporate action in which a company's existing shares are divided into multiple shares
corporate bonds
A debt security issued by a corporation and sold to investors
depreciation
A decrease in an asset's value caused by unfavorable market conditions.
dividend
A distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
stock dividend
A dividend payment made in the form of additional shares, rather than a cash payout.
Dividend yield
A financial ratio that shows how much a corporation pays out in dividends each year relative to its share price. (Annual dividends per share/price per share)
income statement
A financial statement that measures a company's financial performance over a specific accounting period
balance sheet
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time
prospectus
A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public
SEC
A government commission created by Congress to regulate the securities markets and protect investors
Primary market
A market that issues new securities on an exchange
Secondary market
A market where investors purchase securities or assets from other investors, rather than from issuing companies themselves NASDAQ, NYSE
treasury notes
A marketable U.S. government debt security with a fixed interest rate and a maturity between one and 10 years
specialist
A member of an exchange who acts as the market maker to facilitate the trading of a given stock
technical analysis
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity
red herring
A preliminary registration statement that must be filed with the SEC describing a new issue of stock and the prospects of the issuing company.
market order
A request to buy or sell a stock at the current market value.
common stock
A security that represents ownership in a corporation
over the counter
A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc
commission
A service charge assessed by a broker or investment advisor in return for providing investment advice and/or handling the purchase or sale of a security
treasury bills
A short-term debt obligation backed by the U.S. government with a maturity of less than one year
NYSE
A stock exchange based in New York City, which is considered the largest equities-based exchange in the world based on total market capitalization of its listed securities
Bid and asked quotation
A two-way price quotation that indicates the best price at which a security can be sold and bought at a given point in time
debenture
A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer
price earnings ratio
A valuation ratio of a corporation's current share price compared to its earnings per share.
stockbroker
An agent that charges a fee or commission for executing buy and sell orders submitted by an investor
Annual report
An annual publication that public corporations must provide to shareholders to describe their operations and financial conditions
DOT
An electronic system that increases order efficiency by routing orders for listed securities directly to a specialist on the trading floor, instead of through a broker.
floor broker
An employee of a member firm who executes trades on the exchange floor on behalf of the firm's clients.
standard and poors
An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors
investment banker
An individual who works in a financial institution that is in the business primarily of raising capital for companies, governments and other entities, or who works in a large bank's division that is involved with these activities.
block trade
An order or trade submitted for sale or purchase of a large quantity of securities
market order
An order that an investor makes through a broker or brokerage service to buy or sell an investment immediately at the best available current price
round lot
Any amount of shares divisible by 100
odd lot
Anything less than a standard 100 shares of stock
listed
Being included and traded on a given exchange
risk capital
Equity capital for which there is no guarantee that stockholders will ever recoup their investment or earn a decent return.
compound interest
Interest earned on both the principal amount and any interest already earned.
notes payable
Short-term or long-term liabilities that a business promises to repay by a certain date.
DJIA
The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the Nasdaq.
Investing
The act of committing money or capital to an endeavor (a business, project, real estate, etc.) with the expectation of obtaining an additional income or profit.
speculating
The act of trading in an asset, or conducting a financial transaction, that has a significant risk of losing most or all of the initial outlay, in expectation of a substantial gain.
principal amount
The amount originally lent
federal reserve system
The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system
transferred and held
The certificate is prepared and kept for the owner in the brokerage firm's vault
mark up
The difference between an investment's lowest current offering price among dealers and the higher price a dealer charges a customer.
markdown
The difference between the highest current bid price among broker-dealers in the market and the lower price that a dealer charges a customer.
statement of cash flow
The document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter.
default
The failure to promptly pay interest or principal when due. Default occurs when a debtor is unable to meet the legal obligation of debt repayment. Borrowers may default when they are unable to make the required payment or are unwilling to honor the debt.
IPO
The first sale of stock by a private company to the public
coupon
The interest rate stated on a bond when it's issued
transferred and shipped
The name of the owner is transferred onto the stock certificate that is mailed. The stockholder then keeps the certificate in a safe place
rule of 72
The number of years it takes for a certain amount to double in value is equal to 72 divided by its annual rate of interest.
underwrite
The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt).
dollar cost averaging
The technique of buying a fixed dollar amount of a particular investment on a regular schedule, regardless of the share price. More shares are purchased when prices are low, and fewer shares are bought when prices are high.
GTC order (Good till cancelled)
This is an order that remains in effect on the specialist's book until executed or cancelled.
bonds
a certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The city issued bonds to raise money for putting in new sewers.
accounts receivable
a creditor's accounts of money owed to him
accounts payable
a debtor's accounts of money he owes
board of directors
a group of individuals that are elected as representatives of the stockholders to establish corporate management related policies and to make decisions on major company issues.
limit order
a request to buy or sell a stock at a specified price
term
amount of time
margin account
an account with a securities brokerage in which the broker extends credit
cash account
an account with a securities brokerage whose transactions are settled on a cash basis
fundamental analysis
attempt to study everything that can affect the security's value, including macroeconomic factors (like the overall economy and industry conditions) and company-specific factors (like financial condition and management).
municipal bonds
bonds issued by states, counties, cities, and towns to fund large projects as well as operating budgets. they are exempt from federal taxes and from state and local taxes for the investors who live in the state where they are issued.
flexible expenses
costs that do not stay the same such as utilities, clothes, and food
Bull market
economic prosperity
mutual funds
financial organization that pools people's money and invests it
growth stock theory
investment concept involving the purchase of shares in companies that increase earnings and dividends faster than the growth rate of the general economy over a period of years
Authorized shares
maximum number of shares that a company is legally permitted to issue, as specified in its articles of incorporation.
margin requirement
minimum deposits left with a stockbroker to be used as partial payment on other securities
equity capital
money that a business gets from its owners in order to operate.
venture capital
money to startup firms and small businesses with perceived long-term growth potential.
earnings per share
net income or profit divided by the number of stock shares outstanding
phases of the business cycle
peak- top contraction-going down trough- bottom expansion-recovery
bear market
poor economic market
self-providing
providing for yourself
Budgeting
quantitative planning through which managers decide how to allocate available money to best accomplish company goals
Short selling
selling stock borrowed from a broker that must be replaced at a later time
fixed expenses
set costs that must be paid such as rent, insurance, and car payments
trading
short term
venture capitalist
someone who provides money to startup firms and small businesses with perceived long-term growth potential.
diversification
spreading out investments to reduce risk
Outstanding shares
stock currently held by investors, including restricted shares owned by the company's officers and insiders, as well as those held by the public.
gross national product
the amount made here and abroad
gross domestic product
the amount made here only
maturity date
the date on which a financial obligation must be repaid
street name
the name of a brokerage firm in which stock is held on behalf of a customer
par value
the value of a security that is set by the company issuing it
stockholder's equity
total assets-total liabilites
profitability and progress
two P's of growth stock investing