Fin Mrkts-Ch9

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AMERICAN DEPOSITORY RECEIPTS (ADR'S)

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A RECEIPT FOR FOREIGN STOCKS HELD BY A TRUSTEE. THE RECEIPTS TRADE ON U.S. STOCK EXCHANGES INSTEAD OF THE ACTUAL STOCK.

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BOND INDENTURE

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A DOCUMENT ACCOMPANYING A BOND THAT SPELLS OUT THE DETAILS OF THE BOND ISSUE, SUCH AS COVENANTS AND SINKING FUN PROVISIONS. IT STATES THE LENDER'S RIGHT AND PRIVILEGES AND THE BORROWER'S OBLIGATIONS.

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CALL PROVISION

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A RIGHT, USUALLY INCLUDED IN THE TERMS OF A BOND, THAT GIVES THE ISSUER THE ABILITY TO REPURCHASE OUTSTANDING BONDS BEFORE THEY MATURE.

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COMMON STOCK

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A SECURITY THAT GIVES THE HOLDER AN OWNERSHIP INTEREST IN THE ISSUING FIRM. THIS OWNERSHIP INTEREST INCLUDES THE RIGHT TO ANY RESIDUAL CASH FLOWS AND THE RIGHT TO VOTE ON MAJOR CORPORATE ISSUES.

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FINANCIAL GUARANTEE

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A CONTRACT THAT GUARANTEES THAT BOND PURCHASERS WILL BE PAID BOTH PRINCIPAL AND INTERESTS IN THE EVENT THE ISSUER DEFAULTS ON THE OBLIGATION.

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GENERAL OBLIGATION BONDS

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BONDS THAT ARE SECURED BY THE FULL FAITH AND CREDIT OF THE ISSUER, WHICH INCLUDES THE TAXING AUTHORITY OF MUNICIPALITIES.

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JUNK BONDS

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BONDS RATED LOWER THAN BBB BY BOND-RATING AGENCIES. JUNK BONDS ARE NOT INVESTMENT GRADE AND ARE CONSIDERED SPECULATIVE. THEY USUALLY HAVE A HIGH YIELD TO COMPENSATE INVESTORS FOR THEIR HIGH RISK.

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NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATION SYSTEM(NASDAQ)

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A COMPUTERIZED NETWORK THAT LINKS DEALERS AROUND THE COUNTRY TOGETHER AND PROVIDES PRICE QUOTES ON OVER-THE-COUNTER SECURITIES

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PREFERRED STOCK

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STOCK ON WHICH A FIXED DIVIDEND MUST BE PAID BEFORE COMMON DIVIDENDS ARE DISTRIBUTED. IT OFTEN DOES NOT MATURE AND USUALLY DOES NOT GIVE THE HOLDER VOTING RIGHTS IN THE COMPANY.

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REGISTERED BONDS

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BONDS REQUIRING THAT THEIR OWNERS REGISTER WITH THE COMPANY TO RECEIVE INTEREST PAYMENTS. REGISTERED BONDS HAVE LARGELY REPLACED BEARER BONDS, WHICH DID NOT REQUIRE REGISTRATION.

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RESTRICTIVE COVENANTS

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PROVISIONS THAT SPECIFY CERTAIN ACTIVITIES THAT A BORROWER CAN AND CANNOT ENGAGE IN.

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REVENUE BONDS

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BONDS FOR WHICH THE SOURCE OF INCOME THAT IS USED TO PAY THE INTEREST AND TO RETIRE THAT BONDS IS FROM A SPECIFIC SOURCE, SUCH AS A TOLL ROAD OR AN ELECTRIC PLANT. IF THIS REVENUE SOURCE IS UNABLE TO MAKE THE PAYMENTS, THE BONDS CAN DEFAULT, DESPITE THE ISSUING MUNICIPALITY'S BEING OTHERWISE HEALTHY.

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SEPARATE TRADING OF REGISTERED INTEREST AND PRINCIPAL SECURITIES (STRIPS)

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SECURITIES THAT HAVE THEIR PERIODIC INTEREST PAYMENTS SEPARATED FROM THE FINAL MATURITY PAYMENT AND THE TWO CASH FLOWS ARE SOLD TO DIFFERENT INVESTORS.

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SINKING FUND

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FUND CREATED BY A PROVISION IN MANY BOND CONTRACTS THAT REQUIRES THE ISSUER TO SET ASIDE EACH YEAR A PORTION OF THE FINAL MATURITY PAYMENT SO THAT INVESTORS CAN BE CERTAIN THAT THE FUNDS WILL BE AVAILABLE AT MATURITY.