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Definition
| a particular type of debt or equity that a company issues to the public to raise money. (Commercial Banks, Pension funds, mutual funds, insurance companies) |
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| borrowed money that must be repaid. A financial instrument. |
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| when the principal must be repaid. |
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| the amount that must be repaid at the end of the term. Also known as the maturity value, par value, and/or face value of the debt. |
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| the par value of the bond times the annual coupon rate (MxKd) |
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Definition
| includes US Treasury bills, bonds and notes. These are considered default-free instruments. |
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| State and local government debt |
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Definition
| includes revenue-generating municipal bonds and general obligation municipal bonds (both are called munis). Revenue-generating bonds are repaid with revenue generated by the project that the bond financed; general obligation bonds are repaid with tax dollars. |
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Definition
| includes commercial paper, term loans, junk bonds and investment grade bonds. |
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| the contract between the buyer and seller(or lender and borrower). Specifies restrictive covenants that constrain the actions of the borrower, such as call provisions and sinking fund requirements |
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| a bond with no collateral backing it up |
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| bond secured by some form of collateral. Lower cost than debenture bond. |
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| Moody's, Standard & Poor's, Fitch (rate corporate debt on a scale from AAA to D) The higher the rating, the less risky it is, therefore the lest costly it is to issue. |
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| A form of ownership or piece of a company. Never matures and may or may not pay dividends. Get paid last in the event that the company is liquidated. |
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Definition
| a sort of cross between common stock and bonds. They have priority over common stock in the event of liquidation, they pay dividends (which make them feel like common stocks), but the dividends are of a fixed amount (which makes them feel like bonds) |
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Definition
| financial instruments whose value is based on the value of some other, underlying financial asset. The most widely known is a stock option. |
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Term
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Definition
| where saver/lenders/investors give up their money in exchange for the securities of spenders/borrowers/companies. |
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Definition
| stock market, where stocks are trade |
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Term
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Definition
| where bonds, loans, commercial paper, US Treasuries, and other debt instruments are traded |
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Term
| New York Stock Exchange (NYSE) |
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Definition
| the biggest stock market in the US. It is an organized physical exchange; that is, a real, physical place, located on Wall Street in New York City. |
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Term
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Definition
| an organized virtual stock exchange. It is a collection of dealers and brokers that are connected electronically via telephones and computers |
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| Over-the-counter (OTC) stock market |
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Definition
| requires dealers to negotiate directly with one another to trade stocks. Ex. Pink Sheets (either penny stocks or stock of companies that have poor credit ratings) |
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Term
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Definition
| buy inventory and then sell it. They make their money on the spread, that is, the difference between the purchase price and the sale price. |
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Definition
| match up buyers and sellers, and earn commissions on the resulting transactions. |
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Definition
| where securities with maturities of more than a year (stocks and medium-to-long-term debt instruments) are traded |
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Term
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Definition
| where securities that mature in a year or less (short-term debt instruments) are traded |
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Term
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Definition
| where first time issues of stocks and bonds are offered to the public. The stocks or bonds end up in the hands of the public, and the cash ends up in the hands of the issuing company. |
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Term
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Definition
| where a company that already has stocks and bonds outstanding issues a new offer of stocks to the public (in order to raise new money) in the primary market. |
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Term
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Definition
| when initial buyers of stock or bonds decide to sell their investments to other members of the investing public. None of the money goes to the company that originally issued the stock or bond. |
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| Securities and Exchange Commission (SEC) |
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Definition
| created after the Great Depression by FDR to regulate the issuing and trading of financial securities. |
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Term
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Definition
| an SEC database where you can look up public financial information |
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Term
| Direct Purchase Program (DPP) |
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Definition
| a type of direct transfer program which enables a company to sell stocks directly to investors, enabling the investor to avoid paying a broker's commission. (Downside is that the shares may take longer to liquidate vie the DPP than they would through a broker) |
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Definition
| helps companies issue new securities to the public |
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Definition
| facilitate the transfer of funds between those who have money and those who need money |
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| the total market value of all the securities owned by a mutual fund, divided by the number of shares the fund has issued to investors. The price of one share of the fund. |
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| commissions the fund collects from investors and pays to its salespeople |
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Definition
| investment companies that pool the resources of many investors in order to buy stocks and/or bonds of other companies. |
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Definition
| reflects all the other expenses of the fund that are passed along to its investors. Evidence suggests that mutual funds with lower expense ratios outperform those with higher expense ratios. |
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Term
| Federal Reserve System (the Fed) |
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Definition
| the central bank of the US. It is responsible for regulating banks, S&Ls, and other depository institutions, clearing all of the paper checks and electronic payments in the US so that monies get where they're supposed to go, holding the US Treasury's checking account, and, most importantly, conducting monetary policy. |
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Term
| Fed conducting monetary policy |
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Definition
| Setting bank reserve requirements (If the Fed decreases the reserve requirement, banks can lend more money, so the money supply increases. 0,3,10%) Setting the discount rate (if the Fed decreases the discount rate, banks borrow more money from the Fed, which means they can lend more, so the money supply increases. 0.05%) Conducting open market operations (If the Fed buys Treasuries from investors, the investors take the proceeds and put them in their bank accounts, thus increasing the money supply) |
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Term
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Definition
| determined by US govs foreign trade deficit, US gov budget surplus/deficit (deficits put upward pressure on interest rates), money supply (goes down, interest rates go up) |
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