Term
|
Definition
| Bonds that can be exchanged for stock. |
|
|
Term
| Syndicate Formula - Calculate the syndicate's spread |
|
Definition
| Spread = Public offering price - Price paid to issuer |
|
|
Term
| Syndicate Formula - Calculate the syndicate's takedown |
|
Definition
| Takedown = spread - management fee |
|
|
Term
| Syndicat Formula - Calculate additional takedown |
|
Definition
| Additional takedown = takedown - concession |
|
|
Term
| Stock Formula - Calculate issued stock |
|
Definition
| Issued stock = Treasury stock + Outstanding stock |
|
|
Term
| Stock Formula - Calculate the Value of a cum-right (before ex-right) |
|
Definition
Value of a right =
Market price - Subscription price
Number of rights to purchase one share + 1 |
|
|
Term
| Bond Formula - Calculate current yield |
|
Definition
| Current Yield = Annual interest/Market price |
|
|
Term
| Bond Formula - Calculate conversion ratio |
|
Definition
| Conversion ratio = Par value/Conversion price |
|
|
Term
| Municipal Debt Formula - Calculate per-capita debt |
|
Definition
| Per-capita debt = (Net direct debt + overlapping debt)/municipality population |
|
|
Term
| Municipal Debt Formula - Calculate debt service coverage ratio |
|
Definition
| Debt service coverage ratio = (net revenue/principal) + interest |
|
|
Term
| Municipal Debt Formula - Calculate accrued interest |
|
Definition
| Accrued interest = Principal x rate x time |
|
|
Term
| Packaged Security Formula - Calculate Average cost per share |
|
Definition
| Average Cost per Share = Total dollars invested/shares bought |
|
|
Term
| Packaged Securities Formula - Calculate sales charge, NAV |
|
Definition
| Net Asset Value = Value of fund's assets/outstanding Shares |
|
|
Term
| Packaged Securities Formula - Calculate sales charge, POP |
|
Definition
| Public Offering Price = Net Asset Value + Broker's commission |
|
|
Term
| Packaged Securities Formula - Calculate sales charge (as a percent) |
|
Definition
| Sales Charge = Public Offering Price - (Net Asset Value - Public Offering Price) |
|
|
Term
| Options Formula - Calculate time value |
|
Definition
| Time Value = Premium - Intrinsic Value |
|
|
Term
| Options Formula - Calculate break-even point for buying a call |
|
Definition
| Break-even point = strike price + premium |
|
|
Term
| Options Formula - Calculate break-even point for selling a call |
|
Definition
| Break-even point = strike price - premium |
|
|
Term
| Options Formula - Calculate break-even point for buying a put |
|
Definition
| Break-even point = strike price - premium |
|
|
Term
| Options Formula - Calculate break-even for selling a put |
|
Definition
| Break-even = Strike price - premium |
|
|
Term
| Securities Analysis Formula - Calculate net working capital (net worth) |
|
Definition
| Net Worth = Assets - Liabilities |
|
|
Term
| Securities Analysis Formula - Liquidity Ratio Formulas (Current Ratio, Quick Asset Ratio) |
|
Definition
Current Ratio + Current Assets - Current Liabilities
Quick Asset Ratio = (Current assets - inventory)/Current Liabilities |
|
|
Term
| Securities Analysis Formula - Liquidity Ratio Formulas, Acid Test Ratio |
|
Definition
| Acid Test Ratio = (cash + marketable securities)/current liabilities |
|
|
Term
| Securities Analysis Formula - Capitalization Ratio Formulas, Long Term Capital, Bond Ratio, Debt to Equity Ratio |
|
Definition
Long-term Capital = long-term liabilities + stockholders' equity (aka: net worth)
Bond Ratio = bonds par value/Long-term Capital
Debt-to-equity ratio = (Bonds + Preferred stock)/equity |
|
|
Term
| Securities Analysis Formula - Profitability Ratio Formulas, Operation Profit Margin, Net Profit Ratio |
|
Definition
Operating Profit Margin = Operating Income/net sales
Net Profit Ratio = net income/net sales |
|
|
Term
| Securities Analysis Formula - Asset coverage Ratio Formulas, Net Asset Value per Bond, Bond Interest Coverage, Book Value per Share |
|
Definition
Net Asset Value per Bond = Net Worth/Bonds Shares Outstanding
Bond Interest Coverage = Earning Before Taxes(EBT)/Bond Shares Outstanding
Bok Value per Share = (Assets - Liabilities)/Bond Shares Outstanding |
|
|
Term
| Securities Analysis Formula - Earnings per Share Formulas, Earnings per Share, Price-earnings Ratio*, Dividend Payout Ratio |
|
Definition
Earnings per Common share = (net worth - preferred stock)/common shares outstanding
Price-earnings Ratio = Market price/Earnings per Share
Dividend Payout Ratio = common dividend/earnings per share |
|
|
Term
| Securities Analysis Formula - Capital Asset Pricing Theory (CAPT) |
|
Definition
r = rf + B
where:
r = return of stock
rf = risk-free rate of T-bills
B = Beta value of stock |
|
|
Term
| Margin Formula - Calculate equity for Long Margin Accounts |
|
Definition
| EQ = Long Market Value(LMV) - Debit Balance (DR) |
|
|
Term
| Margin Formula - Calculate Equity for Short Margin Accounts |
|
Definition
| EQ = Purchase Price - Short Market Value (SMV) + Margin Call |
|
|
Term
| Margin Formula - Calculate Credit for Short Margin Accounts |
|
Definition
| Credit(CR) = Short Margin Value + Margin Call |
|
|
Term
| Margin Formula - Calculate Special Memorandum Account (SMA) |
|
Definition
| SMA = EQ - Margin Requirement |
|
|
Term
| Margin Formula - Calculate Buying Power |
|
Definition
| SMA/% designated by Regulation T(usually 50%) |
|
|
Term
| Margin Formula - Calculate Restriction for Long Margin Accounts |
|
Definition
| Restriction = Margin Call - Equity |
|
|
Term
| Margin Formula - Calculate Restriction for Short Margin Accounts |
|
Definition
| Restriction = Margin Call - EQ |
|
|
Term
| Margin Formula - Calculate Maintenance for Long and Short Margin Accounts |
|
Definition
|
|
Term
| Maintenance Call for Long Margin Accounts is at __% |
|
Definition
|
|
Term
| Maintenance call for Short Margin Accounts is at __% |
|
Definition
|
|
Term
|
Definition
| Group of Underwriters, each responsible for selling a portion of the securities |
|
|
Term
|
Definition
1. Find Business for Broker/Dealer
2. Perform Customer Analysis
3. Explain different Investments to Customers, and make good recomendations
4. Manage Customer Accounts, including opening and closing accounts
5. Explain how securities markets work, including SRO's ad factors that affect the markets
6. Obtain and Place customer orders, ensure that they're done properly
7. Maintain Customers, make changes based on the market, and on customer's situation |
|
|
Term
| Common Stockholder Rights (5) |
|
Definition
1. Access to Corporate Books
2. Voting
3. Share in Dividends
4. Preemptive Rights
5. Residual Claim on Corporate Assets |
|
|
Term
|
Definition
When time to vote, amount of shares must be used for each position being voted on.
ex: 1500 shares during a vote for 2 board positions... no more than 1500 for either position. |
|
|
Term
|
Definition
When time to vote, amount of shares can be used for any position being voted on.
ex: 1500 shares during a vote for 2 board positions... 3000 votes can be made for either position. |
|
|
Term
| Syndicate Agreements, Eastern Accounts |
|
Definition
| In Eastern Accounts, responsibility is shared among all members, even after individual's task is complete. |
|
|
Term
| Syndicate Agreements, Western Accounts |
|
Definition
| In Western Accounts, Responsibility belongs only to initial person responsible for selling shares. |
|
|
Term
| Ways a company can register a security with a state (3) |
|
Definition
1. Coordination: Issuer files with SEC, SEC helps them file with the state
2. Qualification: Security is exempt from filing with SEC, but still must file with the state
3. Notification: already filed with state previously, and will just renew. |
|
|
Term
| Main two types of dividends |
|
Definition
Stock Dividends (not taxed, act like a split, where value doesn't change)
Cash Dividends (are taxed, decreases value of stock) |
|
|
Term
|
Definition
| The date that all customers must have SETTLED shares to qualify for. |
|
|
Term
|
Definition
| The day the dividend is removed from the total Price per share (too late to participate in dividend) |
|
|
Term
| Preferred Stockholders' Rights (2) |
|
Definition
1. To receive Cash Dividends Regularly
2. To be paid back their investment BEFORE Common stockholders in case of Bankruptcy |
|
|
Term
| Types of Preferred Stock (7) |
|
Definition
1. Straight Preferred Stock
2. Cumulative Preferred Stock
3. Convertible Preferred Stock
4. Callable Preferred Stock
5. Participating Preferred Stock
6. Prior/Senior Preferred Stock
7. Adjustable/Floating Rate Preferred Stock |
|
|
Term
|
Definition
| If Issuer cannot pay dividend, it will not be owed at a later time. Opposite of Cumulative Preferred Stock |
|
|
Term
| Cumulative Preferred Stock |
|
Definition
| If dividends are not paid by company, they accumulate and are owed at a later date. Opposite of Straight Preferred Stock. |
|
|
Term
| Convertible Preferred Stock |
|
Definition
| Can be traded for Common Stock at any time with the formula Conversion Ratio = Par Value/Conversion Price. Conversion Price is set at issue. |
|
|
Term
|
Definition
| Gives Issuer the right to call(buy) back stock at any time. Usually pays higher Dividends for extra risk. |
|
|
Term
| Participating Preferred Stock |
|
Definition
| The Investor receives shares of Common Stock as dividends. |
|
|
Term
| Prior/Senior Preferred Stock |
|
Definition
| Investor receives money before OTHER preferred stock holders in event of a bankruptcy. |
|
|
Term
| Adjustable/Floating Rate Preferred Stock |
|
Definition
| Dividend Rate of stock is reset every six months in line with current market interest rates. |
|
|
Term
|
Definition
| When ADR's dividends are paid, they're in US Dollars, which means converting foreign currency, thus, causing Currency Risk. |
|
|
Term
|
Definition
| Right to buy a stock at a certain price, for a certain period of time, usually a longer period of time. |
|
|
Term
| Stock and Bond Certificates |
|
Definition
| Can act as a check. They can be signed over to somebody else. |
|
|
Term
|
Definition
| On back of bonds usually, specifies Par Value, Coupon(interest) Rate, Maturity, Collateral, and any Convertible or Callable features. |
|
|
Term
|
Definition
| A Company's Savings account that is used to repay bonds. Having one assures investors that they will get their return. |
|
|
Term
| Different Bond Maturation Schedules (3) |
|
Definition
Series Bonds: Issued different years, mature the same time
Serial Bonds: Carry different Maturity Dates (laddering?)
Term Bonds: Issued same time, Mature at the same time. |
|
|
Term
|
Definition
| Interest Rate investor receives on Par Value of the bond. |
|
|
Term
|
Definition
1. Fully Registered Bonds
2. Partially Registered Bonds
3. Bearer Bonds
4. Book Entry Certificates
5. Callable Bonds
6. Put Bonds
7. Convertible Bonds |
|
|
Term
|
Definition
| Most Common, Registered in the investor's name. The Investor receives interest automatically, without submitting coupons. |
|
|
Term
| Partially Registered Bonds |
|
Definition
| No Longer Issued, still circulating. Only the Par Value is registered in the investor's name. Not the interest. AKA Registered Coupon Bonds. |
|
|
Term
|
Definition
| No longer issued, still in circulation. Not registered in anyone's name. have coupons physically attached that entitle the bearer to interest. AKA Coupon Bonds. |
|
|
Term
|
Definition
| Registered Electronically, traded more easily due to no paper trail. |
|
|
Term
|
Definition
| The issuer has the right to call(buy) back, giving the issuer more control over their outstanding debt. |
|
|
Term
|
Definition
| The Holder has the right to redeem, or PUT them back, with the issuer at par value, so the holder can liquidate their investment before maturation. |
|
|
Term
| Secured vrs. Unsecured Bonds |
|
Definition
| Secured Bonds are less risky due to the collateral, as opposed to Unsecured Bonds are more risky, but usually pay higher interest. |
|
|
Term
| Types of Secured Bonds (4) |
|
Definition
1. Collateral Trusts
2. Guaranteed Bonds
3. Mortgage Bonds
4. Equipment Trusts |
|
|
Term
| Secured Bonds - Collateral Trusts |
|
Definition
| Backed by financial assets the Issuer owns, and held by a trustee, such as a bank, in the event of insolvency. |
|
|
Term
| Secured Bonds - Guaranteed Bonds |
|
Definition
| Backed by another firm, like a parent company. |
|
|
Term
| Secured Bonds - Mortgage Bonds |
|
Definition
| Backed by property owned by the issuer |
|
|
Term
| Secured Bonds - Equipment Trusts |
|
Definition
| Backed by equipment owned by the issuer, usually high priced transportation items like buses, trucks, or airplanes |
|
|
Term
|
Definition
| When an Individual or Organization can no longer meet financial obligations. |
|
|
Term
| Types of Unsecured Bonds (2) |
|
Definition
1. Debentures
2. Income Bonds |
|
|
Term
| Unsecured Bonds - Debentures |
|
Definition
| Holder receives interest when due at predetermined intervals, and the principal at maturity |
|
|
Term
| Unsecured Bonds - Income Bonds |
|
Definition
| Principal is paid at maturity, but interest is only paid when the issuer's earnings are above a predetermined amount. Considered very high risk. |
|
|
Term
| Bond Rating Institutions (2) |
|
Definition
1. Standard and Poor
2. Moody's |
|
|
Term
|
Definition
Highest - AAA, High - AA, Upper Medium - A
Lower Medium - BBB, Speculative - BB, Speculative with Payments missed - B
Speculative with NO Interest - C
In Default - D
Broken Further with + or - |
|
|
Term
|
Definition
Highest - Aaa, High - Aa, Upper Medium - A
Lower Medium - Baa, Speculative - Ba, Speculative with Payments missed - B
Speculative with NO Interest - Caa
In Default - D
Broken Further 1(high)-3(low) |
|
|
Term
|
Definition
1. Nominal - Coupon Rate, interest of bond at issue
2. Current Yield - Annual return on investment based on Market Price of bond |
|
|
Term
| Bond Formula - Calculate accrued interest |
|
Definition
| Accrued Interest = (Days between coupon date and settlement date/360) x annual interest amount |
|
|
Term
| Types of US Treasury Securities (7) |
|
Definition
1. Treasury Bills (T-Bills)
2. Tax Anticipation Bills (TAB)
3. US Treasury Strips (T-strips)
4. Treasury Notes (T-notes)
5. Treasury Bonds (T-bonds)
6. Treasury Inflation-indexed Securities (TIPS)
7. Non-Marketable Savings Bonds, Series EE and Series HH. |
|
|
Term
| US Treasury Securities - Treasury Bills (T-bills) |
|
Definition
| Issued at discount to mature at par, carry initial maturity of 4, 13, and 23 weeks |
|
|
Term
| US Treasury Securities - Tax Anticipation Bills (TABs) |
|
Definition
| Geared towards investors who pay corporate tax. Issued at discount, mature at par usually a few days after corporate tax dates. |
|
|
Term
| US Treasury Securities - Treasury Strips (T-strips) |
|
Definition
| Issued at discount, Mature at par. Mature after 6months to 30years |
|
|
Term
| US Treasury Securities - Treasury Notes (T-notes) |
|
Definition
| Pay interest every 6 months. Mature at 2, 3, 5, and 10 years. |
|
|
Term
| US Treasury Securities - Treasury Bonds (T-bonds) |
|
Definition
| Pay interest every 6 months. Mature at 10 - 30 years. |
|
|
Term
| US Treasury Securities - Treasury Inflation-indexed Securities (TIPS) |
|
Definition
| Pays market interest every 6 months. Par value adjusts to market inflation or deflation. |
|
|
Term
| US Treasury Securities - Non Marketable Savings Bonds, Series EE |
|
Definition
| not resold in the marketplace. Issued at discount, Mature at Par, which must be at least $50. Individuals cannot buy more than $50k in one year. |
|
|
Term
| US Treasury Securities - Non Marketable Savings Bonds, Series HH |
|
Definition
| Receive interest every 6 months. At least $500. Individuals cannot own more than $15k in this type of bond |
|
|
Term
| Collateralized Mortgage Obligations (CMOs) |
|
Definition
| Bonds that are backed by groups of mortgages issued by different agencies, such as Fannie Mae, Ginnie Mae, and Freddy Mac. Investors get paid as homeowners makes mortgage payments or Refi. Do not carry a maturity date, carry extension and pre-payment risk. Split into Tranches to diversify risk. |
|
|
Term
| CMOs - Types of Tranches (4) |
|
Definition
Listed from least risky to most risky:
1. Planned Amortization Class (PAC)
2. Targeted Amortization Class (TAC)
3. Companion Tranches
4. Z-Tranches |
|
|
Term
|
Definition
| With falling mortgage rates, homeowners can pay down their debt faster, and before schedule. Thus, any securities depending on those payments as interest (CMOs), would not receive those higher levels of interest that come from the longer term payment |
|
|
Term
| CMOs - Planned Amortization Class (PAC) tranches |
|
Definition
| Tranch with the most certain amortization date, therefore the least risk, and corresponding return. |
|
|
Term
| CMOs - Targeted Amortization Class (TAC) tranches |
|
Definition
| Tranch with less certain payment schedule and higher risk/return. This can be for reasons like prepayment, or high risk mortgages. |
|
|
Term
| CMOs - Companion tranches |
|
Definition
| Created to support the PAC and TAC CMOs and absorb payment risk. |
|
|
Term
|
Definition
| are created as support until the CMO retires. Last tranches remaining in a CMO. Do not get interest, bought at discount, and reach full value at Maturity. |
|
|
Term
|
Definition
| Short term Debt instruments, generally low list, low return. |
|
|
Term
| Government Backed Money Market Instruments - Federal Funds |
|
Definition
| Offered at discount, reach par at maturity. Helps to fund banks that don't have enough to cover federally required minimums. |
|
|
Term
| Government Backed Money Market Instruments - Federal Reserve Bank Repurchase Agreement (Repo) |
|
Definition
| Offered at discount, reaches par at maturity. Where seller agrees to repurchase an investment(like a T-bill) at a certain price and time. Loans of 1 million or more with a maturity of up to two weeks. |
|
|
Term
| Commercial Money Market Instruments - Negotiable Certificates of Deposit (CDs) |
|
Definition
| Negotiable time deposit, with higher interest due to amount, 100k minimum. Low risk, and can be sold to other investors if needed. |
|
|
Term
| Commercial Money Market Instruments - Commercial Paper (CP) |
|
Definition
| Not required to be registered with the SEC, and not backed with collateral. Issued at a discount, to mature at par, usually within 270 days. |
|
|
Term
| Commercial Money Market Instruments - Banker's Acceptances (BA) |
|
Definition
| AKA Banker's Drafts. Utilized when funding import and export transactions. Short term credit investments backed by a bank |
|
|
Term
| Commercial Money Market Instruments - Eurodollars |
|
Definition
| American Dollars held at a foreign bank located outside the US. Funds are result of payments made to foreign corporations |
|
|
