Section 2 Flashcards
Depository
Commercial banks
Savings and loan associations / Thrifts
Credit unions
Non depository
Life insurance companies
Pension funds
Brokerage firms
Fuh nance companies
Regulators
Federal reserve board
FDIC
SEC
NCUA
Capital markets
Primary IPO
Secondary
Debt financing
Secured or debenture
Must be repaid on maturity date
Interest must be paid whenever specified
Equity financing
Preferred or common
Investment never has to be repaid
Not legally obligated to pay dividends
Bond market
Coupon / interest rate Denomination 1000 Principal Maturity date Unsecured and secured
Bond advantages
No vote
Interest is tax deductible
Temporary source of funds
Can be repaid before maturity with call provision
Bond disadvantages
Increases debt
Legal obligation to pay debt
Repaid on maturity date
Special bond feature
Sinking fund
Callable
Convertible
Optimal portfolio
Diversification
Timelines
Safety and risk
Income and total return
Investment criteria
Risk Yield Duration Liquidity Tax consequences
Corporate bonds
1 to 20 years
Taxable
Riskier than government bonds but higher yield
Municipal bonds
1 to 40 years
Exempt from federal taxes and some state and local taxes
Attractive to investors in high income tax bracket
Us treasury bonds
2 to 30 years
Exempt from state and local taxes
Government backing provides maximum security
