Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Series 6 > S6 Securities Markets, Investment Securities, & Economic Factors (Kaplin) > Flashcards

S6 Securities Markets, Investment Securities, & Economic Factors (Kaplin) Flashcards

1
Q

Prospectus

A
  • the legal document that states a new issue security price, delivery date, & underwriting spread, as well as other material information.
  • it must be given to every investor who purchases a new issue of registered securities
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Net Worth

A
  • A-L= NW

- A=L+NW

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Dealer

A
  • a firm acts as a dealer when it buys or sells security for its own account and add its own risk, then charges the customer a markup or markdown
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Broker

A
  • when executing trade orders on behalf of the customer (others)
  • an individual or firm that charges a fee or commission for executing buy and sell orders submitted by another individual or firm
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Market Maker

A
  • a dealer willing to accept the risk of holding a particular security in its own account to facilitate trading in that security
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Common Stock can be classified in 4 ways:

A
  1. Authorized
  2. Issued
  3. Treasury
  4. Outstanding
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Authorized Stock

A
  • The number of shares of stock that a corporation may issue. This number of shares as stipulated in the corporation state approved charter
  • may be changed by a vote of the corporation stockholders
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Issued Stock

A
  • Equity securities authorized by the issuers registration statement and distributed to the public
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Treasury Stock

A
  • was outstanding stock before it was repurchased by the insurer
  • equity securities that the issuing corporation has issued & repurchased from the public at the CMP
  • NO VOTING
  • NO DIVIDENDS
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Outstanding Stock

A
  • Equity securities issued by a corporation and in the hands of the public
  • I-T=O/S
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Book Value

A
  • current hypothetical liquidation value of a share
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Par Value

A
  • an arbitrary accounting value
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

The Privileges of Common Stock Ownership

A
  1. Voting Rights: DONT vote on dividends (when declared & how much). DO vote on stock splits, memberships on the BOD
  2. Preemptive Rights: maintain their proportionate share
  3. Dividends: cash or additional stock
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Voting

common stock

A
  1. Statutory: allows a stockholder to cast one vote per share owned for each item on a ballot
  2. Cumulative: allow stockholders to allocate their boats in any manner they choose (advantageous for small shareholders)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Limited Liability

A
  • and investors right to limit potential losses to know more then the amount invested
  • A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in the company
  • if a company with limited liability is sued, then the plaintiffs are suing the company not its owners or investors
  • AKA: common stock is non-assessable b
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Common Stock is the most ______ security

A
  • junior (last in liquidation priority list)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Capital Appreciation

A
  • is an increase in the price or value of assets
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Market Risk

A
  • The tendency for securities to move with the market
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Business Risk

A
  • includes speculative nature of the business, the management of the business, the philosophy of the business and so on
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Round Lot

A
  • 100 shares
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

If ABC Corporation stock is purchased at its trading day low ($71), how much does an investor pay for a round a lot?

A
  • $71*100=$7,100
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Preferred Stock

A
  • purchases for income & safety

- LIKE A BOND, preferred stock is issued with a fixed stated rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Preferred Stock Par Value

A
  • $100
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Preferred Stock Ownership Privileges

A
  • except for rare instances, preferred stock does NOT have voting or preemptive rights
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Categories of Preferred Stock

A
  • straight preferred: no special features
  • cumulative preferred: ant dividends in arrears must be paid prior to paying a common dividend
  • convertible preferred: the owner can exchange each preferred share for shares of common stock
  • participating preferred: entitled to its stated dividend & also to additional dividends as a specified % of dividends on common stk, if declared
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Current Yield

A
  • annual div/CMP
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

American Deposit Receipts (ADRs)

negotiable certificate

A
  • a negotiable certificate representing a given number of shares of stock in a foreign corporation. It is bought and sold in the American securities markets
  • is a document guaranteeing the payment of a specific amount of money
  • NO voting rights
  • NO preemptive rights
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

ADR owners are subject to ________ risk

A

-currency

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

The owner of an ADR is likely to receive which of the following?

  1. Dividends
  2. Capital gains or losses
  3. Both dividends and capital gains or losses
  4. Neither dividends nor capital gains or losses
A

-both dividends and capital gains or losses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Rights

A
  • short term
  • offered to existing shareholders with preemptive rights
  • allows stockholders to purchase, talk below the current market price
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Warrants

A
  • long term (offered as a sweetener)

- higher than market price

32
Q

Firm Commitment

A
  • underwriter buts all unsold shares from the insurer and then resales them to the general public
  • the underwriter guarantees the sale of the issued stock at the agreed price. (for the issuer it is the safest but the most expensive type of contracts)
33
Q

Best Efforts Underwriting

A
  • The underwriter agrees to sell as many shares as possible at the agreed price
34
Q

All or None Underwriting

A
  • The underwriter increase either to sell the entire offering her to cancel the deal
35
Q

Standby Underwriting

A
  • form of stock insurance. The insurer contracts The underwriter for the latter to purchase the shares the issuer field to sell under stockholders subscription and applications
36
Q

Bond Par Value

A
  • $1000
37
Q

Liquidation Priority

A
  1. Unpaid wages
  2. IRS
  3. Secured debt
  4. Unsecured bonds (debentures)
  5. Subordinated debt
  6. Preferred stockholders
  7. Common stockholders
38
Q

Common Stock is purchased for _______

A
  • growth, income, growth & income
39
Q

Premium

A
  • the excess of MARKET PRICE over PAR value in a bond price
40
Q

The excess of PAR over the market price of a bond is called ______

A
  • discount
41
Q

Bond

A
  • issuing company or govt legal obligation to repay the principal of a loan to bond investors at a specified future date
  • par value $1000
42
Q

Coupon Yield

A
  • the interest rate stated on the face of the bond that represents the % of interest the issuer pays on the bonds face value
  • AKA: nominal yield/stated rate/fixed rate
43
Q

US GOVT SECURITIES

A
  • tbills: 4,13,26,52 weeks/discount
  • tnotes: 2-10 yrs/semi annual interest
  • tbonds: 10+/semi annual interest
  • STRIPS: type of zero coupon/backed by B/D
  • TIPS: treasury inflation protection securities (a treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation). They are issued with a fixed interest rate but the principal amount is adjusted semi annually by the amount equal to the change in the Consumer Price Index
44
Q

TIPS

A
  • Treasury Inflation Protection Securities
  • backed by US GOV
  • protects against purchasing power risk
45
Q

US GOVT Securities

taxes

A
  • exempt from State/Local but NOT Federal
46
Q

Treasury STRIP

A
  • bace
47
Q

Treasury STRIP

A
  • US GOVT security
  • backed by B/D
  • type of zero coupon bond
48
Q

GNMA

A
  • only agency security backed in full by the U.S. Govt
  • issues pass through certificates
  • investors receive interest & principal on a monthly basis
  • investors by GNMA to satisfy income objectives
  • subject to interest rate & repayment risk
49
Q

Municipal Bonds

A
  • GO Bonds
  • Revenue Bonds
  • taxed at state/local NOT fed
50
Q

GO Bonds

A
  • backed by the insurer
  • voter approved
  • benefits the entire community
  • state/local taxes
51
Q

Revenue Bonds

A
  • type of Muni bond
  • taxed at state/local not Fed
  • backed by user fees
  • utilities, housing, transportation (airport/toll road), education
52
Q

Trust Indenture Act of 1939

A
  • requires corporate bonds of $5 million or more & greater than 270 days to mature to be issued under a trust
  • requires a corporation to appoint a trustee (usually a commercial bank or trust company for its bonds)
  • federal and municipal governments are exempt
53
Q

Who is exempt from The Trust indenture Act of 1939

A
  • federal and govt
54
Q

When the Federal Open Market Committee buys securities, it _______ the supply of money in the banking system

A
  • increases
55
Q

When the Federal Open Market Committee sells securities, it _______ the supply of money in the banking system

A
  • decreases
56
Q

A company’s dividend on its common stock is ________

A
  • determined by its BOD
57
Q

If a corporation wanted to raise capital & offer stock at a given price for the next 30 days, it would issue

A
  • rights
58
Q

2 for 1 Stock Split

A
  • shares double

- price cuts in half

59
Q

Shareholders have a right to vote on such items as ______

A
  • mergers
  • reorganizations
  • recapitalization
  • stock splits
60
Q

An Options Disclosure Document must be delivered ________

A

-prior to opening the account

61
Q

Recession

A
  • occur when GDP declines for 6 consecutive months (2 quarters)
62
Q

Depression

A
  • when a decline in real output of goods & services lasts for 6 consecutive quarters
63
Q

To encourage business activity, the FOMC should:

A
  • increase their purchases of US Treasury securities in the open market
64
Q

When the FOMC buys securities, it _________ the supply of $ in the banking system

A

-increases

65
Q

When the FOMC sells securities, it _______ the supply of money in the banking system

A

-decreases

66
Q

When the Fed wants to expand (or loosen) the money supply, it _____ securities from banks

A

-buys

67
Q

When the Fed wants to contract (or tighten) the money supply, it _____ securities from banks

A

-sells

68
Q

Discount Rate

A

-charge on loans to depository institutions by the NY Federal Reserve Bank

69
Q

Prime Rate

A

-the base rate on corporate loans at large US $ center commercial banks

70
Q

Federal Funds Rate

A

-charged on reserves traded among commercial banks for overnight use in amounts of $1M or more

71
Q

Call Rate (Broker Call Loan Rate)

A
  • the charge on loans to brokers for margin loans
72
Q

The Prime Rate

A

-is the interest rate that large US money center commercial banks charge their most credit where the corporate borrowers

73
Q

Discount Rate

A
  • is the rate the New York Federal Bank charges for short term loans to member banks
74
Q

Broker/Call Rate

A
  • is the interest rate banks charge B/D on money they can borrow to lend to margin acct customers
75
Q

Federal Funds Rate

A
  • the rate the member banks charge each other for overnight loans of $1M or more
76
Q

Taxable Equivalent Yield

A
  • (1-tax bracket)

- % of bond /1-tax bracket

Series 6 (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions