Unit 1 Flashcards
Explain the Money Market and the type of securities it provides.
Open-ended mutual fund that invests in short-term debt securities.
- The NAV is set at $1 per share.
- Certificates of deposit (CDs)
- Commercial paper
- U.S. Treasuries
- Bankers’ acceptances
- Repurchase agreements
Define Income Funds
Mutual funds, ETFs or any other type of fund that seek to generate an income stream for shareholders by investing in securities that offer dividends or interest payments. The funds can hold bonds, preferred stock, common stock or even real estate investment trusts (REITs).
What does ETF mean?
Exchange Traded Fund
What is a Municipal Bond?
A debt security issued by a state, municipality or county to finance its capital expenditures.
- Construction of highways, bridges or schools.
- They are exempt from federal taxes and from most state and local taxes, making them especially attractive to people in high income tax brackets.
General Obligation Bond - GO
A municipal bond backed by the credit and taxing power of the issuing jurisdiction rather than the revenue from a given project.
GO Bonds are issued with the belief that a municipality will be able to repay its debt obligation through taxation or revenue from projects. No assets are used as collateral.
Name 3 types of Municipal Bond?
- General Obligation (GO) Bonds
- Revenue Bonds
- Industrial Development Revenue
Name the only Municipal bond backed by taxes, therefore they are the safest
General Obligation
Go Bonds
What type of bond is backed by the revenue generated from a public project (ex. tolls from highways)
Revenue Bonds (Municipal Bonds)
What type of bonds are backed by the revenue from a PRIVATE project (ex. Yankee Stadium)
Industrial Development Revenue (Municipal Bonds)
When a Corporation folds, liquidates, goes Bankrupt, name the hierarchy of what gets paid.
W = wages T = taxes S = secured debt G = general obligations D = debentures (unsecured debt) S = subordinated debt P = preferred stock C = common stock
Name the 4 Preferred Stock Options
- Callable
- Convertible
- Cumulative
- Straight
Complete this sentence:
The greater the risk…
The greater the possible reward AND possible loss.
Name the market the most popular securities are sold in
- Primary Market
2. Secondary Market
How are securities sold in the Secondary Market?
- Over the Counter (OTC)
2. Stock Exchange
Describe Bonds
- A form of DEBT
- A bond is nothing more than a loan
- Usually pays interest
- Purchased for Income
Describe Stock Securities
- Grant ownership (EQUITY)
- Only issued by corporations
- May pay dividends
- May have voting rights
- Purchased for either Growth or Income
What type of investments:
- Seek capital appreciation.
- Only REALIZED when the security is sold
- Purchased to hedge against inflation
- Associated with Common Stock
Growth
What type of investments:
- Provide CURRENT income
- Investor knows in advance how much will be received
- No inflation protection
Income
What type of stock is:
- Purchased for INCOME
- Grants ownership
- NO voting rights
- May pay a dividend in cash ONLY
- Less Volatile
Preferred Stock
What type of stock is:
- Purchased for GROWTH
- Grants ownership
- Has voting rights
- May pay a dividend in cash or additional stock
- More Volatile
Common Stock
What are the 4 Classifications of Stock?
- Authorized – The total number of shares that a company is authorized to sell
- Issued – Authorized shares that have been sold
- Treasury Stock – Issued shares that have been repurchased by the company
Treasury stock is NOT a government security- Treasury stock does not vote nor does it receive dividends
- Outstanding – Issued stock currently held by investors
What type of security:
- Is purchased for Growth (Capital Appreciation)
- “Buys low and sells high”
- ONLY investment that can outpace inflation
- Will NEVER have Credit Risk
Common Stock
With Common Stock, a stockholder may have what type of vote?
Cumulative or Statutory
What type of vote allows does this example demonstrate:
- An investor owns 1000 shares
- There are five candidates running for three seats open on the board to be voted on
- The investor may cast 1000 shares for each of the three seats
Statutory (Regular)
What type of vote allows does this example demonstrate:
- An investor owns 1000 shares
- There are five candidates running for three seats open on the B.O.D.
- The investor can cast 3000 votes for one candidate
- Advantageous for small shareholders
Cumulative
What allows American investors to purchase foreign stocks traded on foreign exchanges
American Depositary Receipt (ADR)
What is purchased for income and has a par value of $100
Preferred Stock
If you have 4% Preferred Stock, how much will receive per quarter in dividends, or per year
$1.00 per quarter in dividends, or 4.00 per year
What is the The Ex-Dividend date
The first day that an investor can purchase the stock and NOT get the dividend