Chapter 2 Terms Flashcards
Negotiable CDs
CDs that can be sold to someone else in a secondary market. Also known as jumbo CDs because they come in denominations of at least $100,000.
settlement date
The date that buyers are expected to pay for the securities they purchased and sellers are expected to deliver the securities they sold.
“and interest”
A descriptor used to indicate that a bond’s purchase price will include its quoted (clean) price plus any accrued interest since the last payment date.
Street name registration
Registration in which a security is recorded in the issuer’s books in the name of the owner’s brokerage firm, which holds the security in book-entry form.
Global Depository Shares GDSs
Depository receipts of foreign companies that are not issued in the United States. GDRs represent ownership in a foreign company and are marketed outside of both the company’s home country and the United States.
Ex-date
The date at which a stock begins to trade without the new owner receiving the dividend.
beneficial owner
Beneficial owner
Company Logo
One who has the benefits of owning a stock but whose title is held for reasons of safety or convenience “in street name” by that person’s broker.
Street name
Registration in which a security is recorded in the issuer’s books in the name of the owner’s brokerage firm, which holds the security in book-entry form.
Anticipation Notes
Municipal notes that are issued in advance of, or in anticipation of, an expected source of income
Declaration Date
The date that a company’s board of directors declares a dividend.
Advanced refunding
refunding bond in which the old issue remains outstanding for a period longer than 90 days after the refunding bond has been issued
registrar
An entity, such as a bank, that monitors and audits the activities of a company’s transfer agent.
pre-refunding
A type of advance refunding in which a new bond issue is held in escrow until the old bonds can be redeemed at their earliest possible call date.
treasury receipts
A zero coupon bond issued by a private issuer, such as a brokerage firm, and secured by a stripped Treasury security. Also called STRIPS.
record date
The date by which a purchaser must be the owner of record in order to be eligible to receive a dividend or other distribution, fixed by the company on the day that dividends are declared.
subscription price
The price, usually below the market price, at which shareholders holding rights certificates may purchase shares in a rights offering.
payment date
date that the board of directors sets to pay the dividend; also called the payable date
DCF analysis
A valuation method based on the notion that the value of a company can be calculated from its projected free cash flow. In a DCF, future cash flows are estimated and discounted to their respective present values. They are then added to the discounted terminal value to reach an estimated company value.
defease
to remove a loan or bond as a liability on a BS when the borrower has set aside sufficient funds to service the debt
direct registration
registration of a security on an issuer’s books in the owner’s name, where either the issuer or its transfer agent holds the security in book-entry form on the owner’s behalf
series EE bonds
type of US savings bond that earns a fixed ROR. Interest payments are accrued over the life of the bond and paid out with the principal at maturity
Warrant
financial instrument that gives holder the right to purchase securities from issuing company @ a specific price within a specified time frame
I bonds
US savings bonds that pay a guaranteed interest rate that may be adjusted upward when inflation rises
Yankee bonds
US dollar denom’d bonds issued in the US by foreign issuer. May be issued by foreign governements, but more often by corporations and other private entities
bank discount basis
quote from T bills that use the bank discount yield, which is the annualized ratio of the bill’s discount to its face value
balloon maturity
serial bond in which one maturity, usually the last one, contains a disproportionately large amount of the principal
Eurobond
type of international bond that is denominated in a currency other than that of the country where it is issued or where the issuing company has its HQ
Eurodollar bonds
eurobonds denom’d in US dollars meaning that interest and principal will be paid in the US dollars, but bonds will be sold out the US
DDM
A model for determining whether a stock is over- or undervalued. According to the DDM, when dividends are assumed to grow at a constant rate, the price of a stock can be estimated by dividing the annual dividend by the value of the required rate of return less the growth rate.
depository bank
a US bank that buys shares of scts from an issuing company in another country so it can issue ADRs to sell in US markets
book entry bonds
a bond whose ownerhsip is recorded by computer at a central depository but for which no certificate is issued
zero coupon bond
discount bond that makes no interest payment
transfer agent
a bank or trust company hired to keep ownership records of an issuer’s securities and in what form the stock/bonds are held
STRIPS
interest-only or principal-only components of T-notes and bonds that act as 0 coupon securities
bank discount yield
the annual yield on a security sold at a discount such as a T bill or commercial paper
Global Depository Receipts
depository receipts of foreign companies that aren’t issued in the US. GDRs represent ownership in a foreign comp and are marketed outside of both the comp’s home country and the US
current yield
the coupon rate of a bond divided by its market price
Spread**
- the difference between two prices, such as the bid and ask of a listed security, the futures prices from two delivery months of the same commodity or two maturity dates of the same bond, or the price paid to an issuer of securities and the price paid by the public. 2. with regard to options, a position consisting of two or more options of the same type (calls or puts). Compare with combination.
Brady bond
a soverign debt security issued in US dollars by Latin American and other developing countries
duration
a measure of a bond’s price sensitivity to small changes in interest rates
Exchange rate risk
risk that has to do with the possibility that an investment amde in another country’s currency will experience a substantial loss due to a flux in that currency’s value prior to conversion back to US dollars. also called currency risk, exchange risk or foreign exchange risk
Trust indenture
an agreement in a bond contract that spells out the covenants (commitments) to be honored by the issuer and allows a trustee to take action on behalf of the bondholders in the event of a default
Ex- dividend date
date at which a stock begins to trade without the new owner receiving the dividend
Collateralized mortgage obligation
debt instrument backed by a pool of mortgage backed securities or mortgage loans that is structured into several classes of bondholder, eachi with its own interest rate and term
