Vocabulary Flashcards
Common Stock
equity ownership in a corporation
Preferred Stock
represents equity ownership in a corporation but usually does not have the same voting rights or appreciation potential as common stock.
- just as with debt securities, the rate of return on a preferred stock is fixed rather than subject to variation as with common stock
- does not have the same growth potential as common stock
Capital Appreciation
An increase in the market price of securities
Proxy
An absentee ballot
-they have the right to sell or give away their shares without the permission of the corporation
Cumulative Preferred Stock
accrues payments due its shareholders in the event dividends are reduced or suspended
Callable (or redeemable) Preferred
when a company can buy back from investors at a stated price after a specified date
Convertible
if the owner of a preferred stock can exchange the shares for a fixed number of shares of common stock of the issuing coporation
American Depository Receipts (ADR)
A negotiable security that represents a receipt for shares of stock in a non US. Corporation, usually from 1-10 shares
Currency Risk
the possibility that an investment denominated in one currency could decline if the value of that currency declines in its exchange rate with the U.S. dollar
Emerging Markets
markets in lesser developed countries
-low levels of income, low levels of equity capitalization,questionable market liquidity, potential restrictions on currency conversion, high volatility, prospects for economic growth and development,
Developed Markets
markets associated with countries that have highly developed economies with stable political and social institutions
-large levels of equity capitalization, low commission rates, few if any currency conversion restrictions, highly liquid markets
Country Risks
a composite of all the risks of investing in a particular country
Real Estate Investment Trust (REIT)
a company that manages a portfolio of real estate investments to earn profits for shareholders.
- normally publicly traded, and serve as a source of long term financing for real estate projects
- trades on exchanges and otc, not mutual funds, an owner holds undivided interest in a pool o real estate investments
Equity REITS
own commercial property
Mortgage REITs
own mortgages on commercial property
Hybrid REITS
both commercial properties and mortgages on commercial properties
Preemptive Rights
entitle existing common stockholders to maintain their proportionate ownership shares in a company by buying newly issued shares before the company offers them to the general public
Rights Offering
allows stockholders to purchase common stock below the current market price
Warrant
a certificate granting its owner the right to purchase securities from the issuer at a specified price, normally higher than the current market price
Bond
certificate representing the corporation’s indebtedness.
-for taxation purposes, all corporate bond interest is fully taxable as ordinary income on both federal and state tax returns
Municipal Bonds
Bonds issued from state and local political entities
-a security issued by a state or other municipality
Secured Debt Securities
securities that are backed by various kinds of assets of the issuing corporation
Unsecured Debt Securities
securities that are backed only by the reputation, credit record, and financial stability of the corporation
Guaranteed Bond
a bond that is guaranteed as to payment of interest, or both principal and interest, by a corporate entity other than the issuer
General Obligation Bonds (GO)
bonds that are backed by a pledge of the issuer’s full faith and credit for prompt payment of principal and interest
Revenue Bond
bonds that are payable from the earnings of a revenue-producing enterprise, such as a water, sewer, electric or gas system, toll bridge, airport, college dormitory, or other income producing facility
Treasury Bills
a direct short term debt obligations of the US government
- only bills that are issued at a discount
- only treasury security issued without a stated interest rate
- highly liquid
- no credit risk
- interest is exempt from state income tax
Treasury Inflation Protection Securities (TIPS)
a special type of treasury issue, it protects investors against purchasing power risk
Current Yield
Return divided by Investment
Money Market
the market for buying and selling short term loan-able funds in the form of securities and loans.
- the buyer of a money market instrument is the lender o the money; the seller of a money market instrument is the entity borrowing the money
- they are safe and typically has a maturity date of one year or less
Negotiable Certificates of Deposit
- negotiable cds do not have a prepayment penalty
- FDIC insurance applies up to $250k
- 360 day jumbo cds pay interest semi-annually
Commercial Paper
a money market instrument that is short term unsecured paper issued by corporations primarily to raise working capital.
London Interbank Offered Rate (LIBOR)
the world’s most widely used benchmark for for short term interest rates
Eurodollars
US dollars deposited in banks outside the US, that is, the deposits remain denominated in US dollars rather than the local currency.
-pays in US dollars
Eurobond
long term debt instrument issued and sold outside the country of the currency in which it is denominated
-pays in foreign currency
