Definitions

Question 1

Stocks/shares/equity

Answer 1

Common (vote at shareholders meetings and receive dividends), Preferred (doesn’t have voting rights but has a higher claim on assets and earnings)

Question 2

Municipal Bond

Answer 2

A debt security issued by a states to finance its capital expenditures. They are exempt from taxes

Question 3

Corporate Bond

Answer 3

A debt security issued by a corporation and sold to its investors. Considered higher risk than government bonds (coupon payment structure)

Question 4

OTC

Answer 4

Over the Counter – security traded outside a formal exchange, e.g. via a dealer network

Question 5

Derivatives

Answer 5

security with a price that is dependent upon or derived from one or more underlying assets. Most common underlying assets are stocks, bonds, commodities, currencies, interest rates and marked indexes. Can be traded via an exchange or OTC

Question 6

Commodities

Answer 6

any goods exchanged during trade, including goods traded on a commodity exchange

Question 7

Warrants

Answer 7

A derivative that confers the right, but not the obligation, to buy or sell a security (normally equity) at a certain price before expiration.

Question 8

Contracts for differences (CFD)

Answer 8

An arrangements made in a futures contract whereby differences in settlement are made through cash payments rather than the delivery of physical goods/securities