Characteristics, uses, and taxation of Investment Vehicles Flashcards
Large Cap Stocks
market value exceeding 10 billion
Mid Cap stocks
range between 2 and 10 billion
Small Cap Stocks
anything less than 2 billion
Micro Cap Stocks
market value less than 300 million
10Qs
quarterly reports from corporate management to SEC
10Ks
annual reports from corporate management to SEC
Annual Report
written by corporate management for its shareholders
ADRs
American Depositary Receipts
entitle shareholder to all dividends
GIC
Guaranteed Investment Contracts
Similar to CDs but issued by insurance companies
terms range from 2-5 years
often used by defined benefit plans
no interest rate risk
NOI
Net Operating Income
Gross rental receipts + Non-rental income = Potential gross income (PGI) - Vacancy and collection losses = Effective gross income - Operating expenses (excluded interest and depreciation) = Net operating income (NOI) Property’s Cash Flow
Equity REITS
- Invest mainly in income-producing properties
- typically use a modest leverage to finance property investments
Mortgage REITS
- Make loans to develop property or finance construction
- particularly vulnerable to purchasing power risk
RELPs
Real Estate Limited Partnership
non-publicly traded
last about 10-20 years
Derivatives
financial instrument who value is based on an underlying assets or group of assets
Intrinsic Value
- minimum price an option will command
- the difference between the market price of the underlying asset and the exercise price of the option
Time Premium
amount the market price of an option exceeds its intrinsic value
Exercise Price
(strike price) is the price at which the stock can be purchased or sold on exercise of the option
Premium
market price (cost) of an option
As the option approaches its expiration date, the market price of an option (the premium) approach its intrinsic value.
Put
contract that gives the holder the right to sell a specific number of shares of common stock at a set price for a given period of time until the contract expires.
Call
- contract that gives the holder the right to purchase a specific number of shares of common stock set at a price for a given period of time
- premium is nondeductible capital expenditure, when exercised the premium oil included in the basis of the stock, if not exercised, premium is short term gain to writer, if exercised it is added to the gain of sold security
LEAPs
Long-Term Equity Anticipation Securities
maturities of 2 years or more
allow options buyers to assume positions for anticipated long-term movements
Futures contract
agreement between buyer and seller, through a commodity exchange for the future delivery of a commodity at a specified date and price
Spot Price
The current market price of a commodity in the cash market
Open Interest
The number of futures contracts trading for a particular commodity on any given day
Daily Limit
maximum permissible price increase or decrease relative to settlement price of previous day
Warrant
- issued by corporation
- maturities of several years
- not standardized
- warrants are issued with no intrinsic value