Finance Ch 7

Front 1

dividend growth model

Back 1

a model that determines the current price of a stock as its dividend next period divided by the discounted rate less the dividend growth rate

Front 2

dividend growth model

Back 2

a model that determines the current price of a stock as its dividend next period divided by the discounted rate less the dividend growth rate

Front 3

dividend yield

Back 3

a stocks expected cash dividend divided by its current price

Front 4

capital gains yield

Back 4

the dividend growth rate at which the value of an investment grows

Front 5

common stock

Back 5

equity without priority for dividends or in bankruptcy

Front 6

cumulative voting

Back 6

a procedure in which a shareholder may cast all votes for one member of the board of directors

Front 7

straight voting

Back 7

a procedure in which a shareholder may cast all votes for each member of the board of directors

Front 8

proxy

Back 8

a grant of authority by a shareholder allowing another individual to vote that shareholders shares

Front 9

dividends

Back 9

payments by a corporation to its shareholders, made in either cash or stock

Front 10

preferred stock

Back 10

stock with dividend priority over common stock, normally with a fixed dividend rate, sometimes without voting rights

Front 11

primary market

Back 11

the market in which new securities are originally sold to investors

Front 12

secondary market

Back 12

the market in which previously issued securities are traded among investors

Front 13

dealer

Back 13

an agent who buys and sells securities from inventory

Front 14

broker

Back 14

an agent who arranges security transactions among investors

Front 15

member

Back 15

as of 2006, a member is the owner of a trading license on the NYSE

Front 16

commission brokers

Back 16

NYSE members who execute customer orders to buy and sell stock transmitted to the exchange floor

Front 17

specialist

Back 17

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

Front 18

floor brokers

Back 18

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

Front 19

SuperDOT system

Back 19

an electronic NYSE system allowing orders to be transmitted directly to the specialist

Front 20

floor traders

Back 20

NYSE members who trade for their own accounts, trying to anticipate temporary price fluctuations

Front 21

order flow

Back 21

the flow of customer orders to buy and sell securities

Front 22

specialist's post

Back 22

a fixed place on the exchange floor where the specialist operates

Front 23

inside quotes

Back 23

the highest bid quotes and the lowest ask quotes for a security

Front 24

Electronic communications networks (ECN's)

Back 24

web sites that allow investors to trade directly with one another

Front 25

advantages of stock

Back 25

no maturity, no required fixed payments, improves debt to rate coverage

Front 26

disadvantages of stock

Back 26

shareholders may lose some control, future earnings shared with new shareholders, higher flotation costs vs. debt, higher component cost of capital, take over bid

Front 27

properties of capital markets

Back 27

liquidity, efficiency, competition and allocation of capital, market depth, fairness

Front 28

super normal growth

Back 28

dividend growth is not constant initially, but settles down to constant growth eventually

Front 29

government securities

Back 29

T-Bonds, Municipal Bonds

Front 30

corporate securities

Back 30

stocks and bonds

Front 31

investment banker

Back 31

underwrites an issue of securities thus guranteeing the proceeds of the offering to the issuing firm by purchasing securities

Front 32

auction markets

Back 32

involve bidding in a specific location, brokers represent investors for a fee and other trade for their own account

Front 33

negotiated markets

Back 33

consist of a decentralized dealer network

Front 34

spinning

Back 34

CEO's get special rates for stocks on other companies

Front 35

NASDAQ market values are about __ percent of the NYSE

Back 35

25%

Front 36

NASDAQ

Back 36

second biggest stock market, but biggest for number or companies, its online
3,200 companies

Front 37

levels of NASDAQ

Back 37

level 1: timely, accurate source of price quotes
level 2: view price quotes from all NASDAQ markets
level 3: dealers can enter and change price quote info, market markers only

Front 38

over the counter market

Back 38

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

Front 39

emerging market

Back 39

stable, political system, low regulation, low standardization in trading activity

Front 40

underwriter

Back 40

investment bank that helps companies issue new stocks and bonds (IPO) (initial public offering)
bad- make IPO's low and take fee's off

Front 41

Dow Jones averages

Back 41

industrial, transportation, utilities, composite

Front 42

S and P 500

Back 42

benchmark indicator of the overall US stockmarket condition. Based on performance of common stock of the US 500 largest firms

Front 43

efficient market hypothesis

Back 43

actual capital markets are efficient. inefficiencies may exist but they are small and not common

Front 44

strong form efficient

Back 44

prices reflect all information including public and private. investors could not earn abnormal returns regardless of the information they processed

Front 45

semi strong efficiency

Back 45

prices reflect all publicly available information, investors cannot earn abnormal returns by trading on public information

Front 46

weak form efficiency

Back 46

prices reflect all past market information such as price and volume. markets are usually weak form efficient