FINANCE 325

The return on an investment measured in dollars that accounts for all cash flows and capital gains or losses

The annual stock dividend as a percentage of the initial stock price

The change in stock price as a percentage of the initial stock price

The return on an investment measured as a percentage that accounts for all cash flows and capital gains or losses

The return on an investment expressed ona per year or annualized basis

the rate of return on a riskless investment

The extra return on a risky asset over the risk-free rate; the reward for bearing risk

Common measure of volatility

The square root of the variance

A symmetric bell-shaped frequency distribution that is completely defined by its average and standard deviation

The average compound return earned per year over a multi year period ( smaller) All years

The return earned in an average year over a multi year period (particular year)

• Full-service brokers
• discount brokers
• deep-discount brokers

Insurance fund covering investors brokerage accounts with members

A brokerage account in which all transactions are made on a strictly cash basis

A brokerage accountin which, subject to limits, securities can be bought and sold on credit.

The interest rate brokers pay to narrow bank funds for lending to customer margin accounts.

The portion of the value of an investment that is not borrowed

The minimum margin that must be supplied on a securities purchase.. range from a low of 45 % to a high of 100%

EX. if you are investing 10000 of your own cash you can borrow the same amount 10000 but know more

the minimum margin that must be present at all times in a margin account

A demand for more funds that occurs when the margin in an account drops below maintenance margin.

Pledging securities as collateral against a loan.

An arrangement under which a broker is the registered owner of a security.

You pay someone else to make buy, and sell decisions on your behalf. You are responsible for paying any commissions or other costs, as well as managment fees.

You choose the money manager into a single fee you pay to the broker to trade for you, then there is no management fees... this aragangement is called a Discretionary account.

large broker firms offer theses account that provide for complete money management, included check-writing privledges, credit cards, and margin loans.

a means of combing or pooling the funds of a large group of investors. these are alternatives to brokerage accounts.

you actually sell a security that you do not own. you borrow them and eventually will buy them back then give then back to the lender

The amount of common stock held in short positions.

An asset with high liquidity should be sold quickly... Imagine buying an asset and quickly reselling it. the less you would lose on this "round-Trip" transaction, the more liquid the asset is.

401 k- you do not pay taxes immideatly when incurred. When one reires they own income taxes on whatever they take out

You pay taxes on the money you earn immidiatly and do not pay after tax when you retire

Buying and selling in anticipation of the overall market... or buying when you think the prices will rise and selling when you believe prices are going to fall.

The distribution of investments furnds among broad classes of assets.. or distributing between large stocks, small stocks, bonds, ect.

RULE OF THUMB - 60% stocks and 40% bonds

Selection of specific securities within a particular class..

difference between active and passive pg 67!

Real estate investment trusts- a company who owns income producting real estate.

• Basic types Major Subtypes
• interest-bearing
• Money market instraments
• Fixed-incom securities
• Equities
• commmon stock
• preferred stock
• Derivatives
• Futures
• options

• Debt obligations of large corportorations and gov with an original maturity of one year or less
• 1.Thare essentaillyy IOUs sold by large corporations or governments to borrow money
• 2. They mature in less than one year from the time they are sold

Longer-term debt obligations often of corporations and governments, that promise to make fixed payments according to a present schedule. Note or bond... There lives exceed 12 months

is the annual coupon divided by the current bond price.... for most bonds, the coupon rate never changes

Represents ownership in a corporation.... get divedends along with raise/loss in value

Has a Fixed dividend that never changes.. must be paid in whole before commong stock holders.

security originally sold by business or gov to raise money

a financial asset that is derived from an existing traded asset rather than issued by a business or gov. to raise capital. More generally, any financial asset that is not primary asset.

an agreement made today regarding the terms of a trade that will take place later.`

• an agreement that gives the owner the right, but not the obligation, to buy or sell a specific asset at a specified price for a set period of time.
• 2 types: call or put

an optiong that gives the owner the right, but not the obligation, to buy an asset.

an optiong that gives the owner the right right, but not the obligation sell an asset.

the price you pay to buy an option

the price specified in an option contract at which the underlying asset can be bought ( for a call option) or sold (for a put option). also calle dhte striking price or exercise price.

a business that specializes in pooling funds from individual investors and investing them.. all mutuatl funds are these.

• Do not pay taxes if run like a regulated investments companys... consist of
• 1.it must be and investment company holding all of its assets as investments in stocks, bonds and other securtities
• 2. limits the fund to no more than 5 percent of its assets when acquireing a certain security

An investment compnay that stand ready to buy and sell shares at any time. More popularrly sold between investors

An investment company with a fixed number of shares that are bough and sold only in the open stock market.

The value of assets less liabilities held by a mutual fund, divided by the number of shares outstanding abbreviated NAV

Mutual funds are required by law to produce this document along with an annual report

• 1. Sales charges or "loads"
• 2. 12b-1
• 3. Management fees
• 4. Trading costs

A sales chared levied on purchases of shares in some mutual funds.

Sold for Net asset value plus load-fund.. - offering price

a no load fund is sold at NAV

Chares levied on redemptions- Also called Contingent degerred sales charges CDSC

Naamed for SEC rule 12-1, which allows funds to spend up to 1 percent of fund assets annually to cover distribution and marketing costs.

A measure of how much a trading fund does, calculated as the lesser of total purchases or sales during a year by avereage daily assets.

One of the most successful managers in the history of the business

A mutual fund specializing in mongey market instraments.. MMMF..... short-term funds. Short term debt obligations.. all are open market funds... high-quality low risk with maturity less then 90 days.. always maintain a $1 NAV

an investment company not accessible by the general public

Financing for new, high-risk ventures.. example you want to start your own company but do not have money to back it up..= pool funds from investors

The market in which new securities are originally sold to investors.

the market in which previously issued securities trade among investoroes

An IPO initicial public offereing occurs when a company offers stock for sale to the public for the first time.

SEO the sale of additional shares of stock by a company whose shares are already publicly traded

an issue of securities offered for sale to the general public on cash basis

a public issue of securities in which securites are irst offered to existing shareholders (also called a rights offering.)

A firm specializing in arranging financing for companies

to assume the risk of buying newly issued securities from a company and reselling them to investors.

compenasation to the underwriter deteremined by the difference between the underwriters's buying price and offering price.

A group of underwriters formed to share the risk and to help sell an issue

The type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares

the type of underwriting in whidh the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility

the type of underwriting in which the offer price is set based on competitive bidding by investors also known as a uniform price auction.

SEC - Federal regulatory agencey chared with enforcing US securities laws and regulation.

Document prepared as part of a security offering detailing a company's financial position, its operations, and investment plans for the future

A preliminary prostpectus nor yeat approced by the SEC

A trader who buys and sells securities from inventory

An intermdiary who arranges security transactions amoung investors

the price a dealer is willing to pay

the pricea which a dealer is wiling to sell. also called the offer or offering price.

The difference between the bid and the ask price

As of 2006, the owner of a trading license on the NYSE is an exchange member

NYSE members who exwcute customer orders to buy and sell stock trasmitted to the exchange floor

An NYSE member action as a dealer in a small number of securities on the exchange floor; often called the market maker

NYSE member who execute orders for commission brokers on a fee basis; sometimes called 2$ brokers

An electronic NYSE system allowing orders to be transmitted directly to the specialist.

NYSE member who trade for their own accounts, trying to anticipate temporary price flucuations.

fixed place on the exchange floor whee the specialist operates

A customer order to buy or sell securities marked for immediate execution at the current market price

Customer order to buy or sell securities with a specified "limit" price. the order can be executed only at the limit price or better.

customer order to buy or sell securities when a preset "stop" price is reached.

Rule for short sales requiring that before a short sale can be executed, the last price change must be an uptick.

• 1.NASDAQ is a computer network and has no physical location where trading takes place
• 2.NASDAQ has a multiple market maker system rather than a speicalist system.

Securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories.

ECN a Website that allows investors to trade directly with each other

Highest bid quotes and the lowest ask quotes offered by dealers for a security

Off-exchange market for securities listed on an organized exchange

Market for exchange-listed securities in which investors trade directly wiht other investors, ususally through a computer network.

Stock market index which stocks are held in proportion to their share price

Stock market index in which stocks are held in proportion to the aggregate market value

condition that occurs when an index does not reflect all current price information because some of the stocks in the index have not traded