1. Total dollar return
    The return on an investment measured in dollars that accounts for all cash flows and capital gains or losses
  2. Dividend Yield
    The annual stock dividend as a percentage of the initial stock price
  3. Capital gains yeild
    The change in stock price as a percentage of the initial stock price
  4. Total price return
    The return on an investment measured as a percentage that accounts for all cash flows and capital gains or losses
  5. Effective annual return (EAR)
    The return on an investment expressed ona per year or annualized basis
  6. Risk free rate
    the rate of return on a riskless investment
  7. risk premium
    The extra return on a risky asset over the risk-free rate; the reward for bearing risk
  8. Variance
    Common measure of volatility
  9. Standard Deviation
    The square root of the variance
  10. Normal distribution
    A symmetric bell-shaped frequency distribution that is completely defined by its average and standard deviation
  11. Geometric average return
    The average compound return earned per year over a multi year period ( smaller) All years
  12. Arithmetic average
    The return earned in an average year over a multi year period (particular year)
  13. what are the three groups of brokers?
    • Full-service brokers
    • discount brokers
    • deep-discount brokers
  14. Securities investor protection corporation (SIPC)
    Insurance fund covering investors brokerage accounts with members
  15. Cash account
    A brokerage account in which all transactions are made on a strictly cash basis
  16. Margin account
    A brokerage accountin which, subject to limits, securities can be bought and sold on credit.
  17. call money rate
    The interest rate brokers pay to narrow bank funds for lending to customer margin accounts.
  18. Margin
    The portion of the value of an investment that is not borrowed
  19. Initial margin
    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
  20. Maintenance margin
    the minimum margin that must be present at all times in a margin account
  21. Margin call
    A demand for more funds that occurs when the margin in an account drops below maintenance margin.
  22. hypothecation
    Pledging securities as collateral against a loan.
  23. Street name
    An arrangement under which a broker is the registered owner of a security.
  24. Advisory account
    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.
  25. wrap accounts
    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.
  26. asset management accounts
    large broker firms offer theses account that provide for complete money management, included check-writing privledges, credit cards, and margin loans.
  27. mutual fund
    a means of combing or pooling the funds of a large group of investors. these are alternatives to brokerage accounts.
  28. Short sale
    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
  29. Short interest
    The amount of common stock held in short positions.
  30. LIquidity
    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.
  31. Tax-deferred
    401 k- you do not pay taxes immideatly when incurred. When one reires they own income taxes on whatever they take out
  32. Roth individual retirment account IRA
    You pay taxes on the money you earn immidiatly and do not pay after tax when you retire
  33. Market timing
    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.
  34. Asset allocation
    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
  35. Security selection
    Selection of specific securities within a particular class..

    difference between active and passive pg 67!
  36. REIT
    Real estate investment trusts- a company who owns income producting real estate.
  37. Classifications of financial assets
    • Basic types Major Subtypes
    • interest-bearing
    • Money market instraments
    • Fixed-incom securities
    • Equities
    • commmon stock
    • preferred stock
    • Derivatives
    • Futures
    • options
  38. Money Market instraments
    • 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
  39. fixed income securities
    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
  40. Current yield
    is the annual coupon divided by the current bond price.... for most bonds, the coupon rate never changes
  41. Common Stock
    Represents ownership in a corporation.... get divedends along with raise/loss in value
  42. Perferred stock
    Has a Fixed dividend that never changes.. must be paid in whole before commong stock holders.
  43. primary asset
    security originally sold by business or gov to raise money
  44. Derivative asset
    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.
  45. future contract
    an agreement made today regarding the terms of a trade that will take place later.`
  46. option contract
    • 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
  47. Call option
    an optiong that gives the owner the right, but not the obligation, to buy an asset.
  48. Put option
    an optiong that gives the owner the right right, but not the obligation sell an asset.
  49. option premium
    the price you pay to buy an option
  50. strike price
    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.
  51. Investment company
    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
    • 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
  52. Open-end fund
    An investment compnay that stand ready to buy and sell shares at any time. More popularrly sold between investors
  53. close-end fund
    An investment company with a fixed number of shares that are bough and sold only in the open stock market.
  54. Net asset value
    The value of assets less liabilities held by a mutual fund, divided by the number of shares outstanding abbreviated NAV
  55. Prospectus
    Mutual funds are required by law to produce this document along with an annual report
  56. 4 types of expenses or fees assoviated with buying or owning mutual fund shares:
    • 1. Sales charges or "loads"
    • 2. 12b-1
    • 3. Management fees
    • 4. Trading costs
  57. Front-end load
    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
  58. Back-end load
    Chares levied on redemptions- Also called Contingent degerred sales charges CDSC
  59. 12b-1
    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.
  60. Turning
    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.
  61. Peter lynch
    One of the most successful managers in the history of the business
  62. Money market mutual fun
    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
  63. Hedge funds
    an investment company not accessible by the general public
  64. Venture Capital VC
    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
  65. Primary market
    The market in which new securities are originally sold to investors.
  66. Secondary market
    the market in which previously issued securities trade among investoroes
  67. Initial public offereing
    An IPO initicial public offereing occurs when a company offers stock for sale to the public for the first time.
  68. Seasoned equity offering
    SEO the sale of additional shares of stock by a company whose shares are already publicly traded
  69. General cash offer
    an issue of securities offered for sale to the general public on cash basis
  70. Rights offer
    a public issue of securities in which securites are irst offered to existing shareholders (also called a rights offering.)
  71. Investment banking firm
    A firm specializing in arranging financing for companies
  72. Underwrite
    to assume the risk of buying newly issued securities from a company and reselling them to investors.
  73. Underwriter spread
    compenasation to the underwriter deteremined by the difference between the underwriters's buying price and offering price.
  74. Syndicate
    A group of underwriters formed to share the risk and to help sell an issue
  75. firm commitment underwriting
    The type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares
  76. Best efforts underwriting
    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
  77. dutch auction underwriting
    the type of underwriting in which the offer price is set based on competitive bidding by investors also known as a uniform price auction.
  78. Securities and exchange commision
    SEC - Federal regulatory agencey chared with enforcing US securities laws and regulation.
  79. Propectus
    Document prepared as part of a security offering detailing a company's financial position, its operations, and investment plans for the future
  80. Red herring
    A preliminary prostpectus nor yeat approced by the SEC
  81. dealer
    A trader who buys and sells securities from inventory
  82. Broker
    An intermdiary who arranges security transactions amoung investors
  83. Bid price
    the price a dealer is willing to pay
  84. ask price
    the pricea which a dealer is wiling to sell. also called the offer or offering price.
  85. Spread
    The difference between the bid and the ask price
  86. NYSE exchange member
    As of 2006, the owner of a trading license on the NYSE is an exchange member
  87. commission broker
    NYSE members who exwcute customer orders to buy and sell stock trasmitted to the exchange floor
  88. Specialist
    An NYSE member action as a dealer in a small number of securities on the exchange floor; often called the market maker
  89. Floor brokers
    NYSE member who execute orders for commission brokers on a fee basis; sometimes called 2$ brokers
  90. SuperDOT system
    An electronic NYSE system allowing orders to be transmitted directly to the specialist.
  91. floor traders
    NYSE member who trade for their own accounts, trying to anticipate temporary price flucuations.
  92. Specialist's post
    fixed place on the exchange floor whee the specialist operates
  93. Market order
    A customer order to buy or sell securities marked for immediate execution at the current market price
  94. Limit orders
    Customer order to buy or sell securities with a specified "limit" price. the order can be executed only at the limit price or better.
  95. Stop order
    customer order to buy or sell securities when a preset "stop" price is reached.
  96. NYSE uptick rule
    Rule for short sales requiring that before a short sale can be executed, the last price change must be an uptick.
  97. Difference between NYSE and NASDAQ
    • 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.
  98. Over the counter market
    Securities market in which trading is almost exclusively done through dealers who buy and sell for their own inventories.
  99. Electronic Communications network
    ECN a Website that allows investors to trade directly with each other
  100. inside quotes
    Highest bid quotes and the lowest ask quotes offered by dealers for a security
  101. Third market
    Off-exchange market for securities listed on an organized exchange
  102. Fourth Market
    Market for exchange-listed securities in which investors trade directly wiht other investors, ususally through a computer network.
  103. Price weigthed index
    Stock market index which stocks are held in proportion to their share price
  104. Value weighted index
    Stock market index in which stocks are held in proportion to the aggregate market value
  105. index staleness
    condition that occurs when an index does not reflect all current price information because some of the stocks in the index have not traded
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