Securities Flashcards

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1
Q

American Depositary Receipts

A

Facilitate US citizens owning foreign shares.
Foreign shares held by bank.
ADR is US security traded in US markets (quoted in US dollars).
Dividends declared in foreign currency but paid in US dollars (currency risk).

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2
Q

REITS

A

Traded on exchanges or OTC.
Provide liquidity.
75% of assets must be invested in operating income producing real estate or mortgages to qualify as a REIT.

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3
Q

Rights

A

Available to existing shareholders.
Short term (30-45 days).
When issued exercise price is below CMV (allows purchase at a discount).
Not marginable.

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4
Q

Warrants

A

Offered with other securities as “sweeteners”.

Sold as units

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5
Q

Preferred shares

A

Fixed par value

Dividends are fixed stated rate

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6
Q

Straight (noncumulative)

A

Missed dividends are not payable

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7
Q

Cumulative

A

Missed dividend (dividends in arrears and current preferred dividend must be paid before common).

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8
Q

Callable

A

Issuer may buy back shares after a specified date at a specified price.

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9
Q

Participating

A

Issuer may pay more than stated dividend

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10
Q

Adjustable rate

A

Dividend tied to another rate

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11
Q

Stock dividend adjustment

A

Price of stock adjusts down for dividend
Investor receives addition shares
Aggregate value remains the same
Taxable when shares are sold

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12
Q

Cash dividend

A

Price of stock adjusts down by the amount of dividend on the ex-dividend date
Taxable when received

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13
Q

Declaration date

A

Determined by the BOD

Date dividend is declared

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14
Q

Ex-dividend date

A

Determined by FINRA or SRO

2 business days before record date

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15
Q

Record date

A

Determined by BOD

Date trade must settle by for buyer to receive current dividend

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16
Q

Payable date

A

Determined by BOD

Date dividend is distributed

17
Q

Outstanding shares

A

Issued shares - Treasury shares

18
Q

Treasury shares

A

Issued shares - outstanding shares

19
Q

Dividends payable as

A

Cash, stock, or property

20
Q

Dividend (current) yield

A

Annual dividend/ current market value

21
Q

Conversion Ratio

A

Par/Conversion price

22
Q

Parity price of common

A

Market price of bond/conversion ratio

23
Q

Parity price of bond

A

Conversion ratio * common stock price

24
Q

Coupon, nominal, or stated yield

A

Annual interest/par value

25
Q

Callable bonds

A

Issuer can buy back bonds as of a specified date prior to maturity at a specified price
Issuer will call bonds in anticipation of current interest rates falling
Allows issuer to lower the cost of borrowing
Facilitates “refunding”; replacing one issuer with another at a lower net interest cost to the issuer.