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49 Cards in this Set

  • Front
  • Back
Money Market
Refers to transactions in short-term debt instruments
Capital Market
Refers to the market for long-term debt and equity securities.
Prime Rate
The interest rate charged on loans made by commercial banks to their best customers.
What are the most widely held short-term debt instruments?
U.S. Treasury Bills
Limited Liability
The stockholder is not liable for the losses and liabilities of a corporation and connot lose more than what was paid for the stock.
Proportionate Ownership
A stockholder's ownership is in proportion to all the common stock outstanding.
Transfer Rights
The shareholder has the right to transfer their ownership to another party (sell their stock) or could give it away.
Stockholders may share in the profits of the corporation.
Preemptive Rights
Existing shareholders have the right to purchase new shares allowing them to maintain their proportionate ownership when more shares are issued to the public.
Shareholders vote in proportion to their holdings, either at the meeting or by proxy (absentee vote).
The shareholder has the right to take actions to protect the corp. against the wrongful acts of management.
What does it mean if a stock certificate is held in street name?
Securites are held in the name of the broker, but owned by the customer. All securities held in margin account are in street name.
Authorized Stock
The amount the corporation has the power to issue.
Outstanding Stock
Stock that has been issued and is in the hands of stockholders.
Treasury Stock
Issued stock that is repurchased in the market by the issuing corporation. It is authorized and issued but not outstanding. It appears on the balance sheet as a deduction from issued stock.
Name the 2 methods of voting for positions on the Board of Directors.
1. Regular (Statutory)
2. Cumulative (Block)
If a stockholder owns 100 shares of stock and six persons are to be elected to the Board. Under Regular (statutory) voting, how would the votes be cast?
The stockholder would cast 100 votes each for 6 people.
If a stockholder owns 100 shares of stock and six persons are to be elected to the Board. Under Cumulative(block) voting, how would the votes be cast?
The stockholder can cast these votes in any way desired.
What are the 3 terms commonly used in referring to the value of stock?
1. Par Value
2. Book Value
3. Market Value
Par Value
The value imprinted on a security, such as a stock certificate or bond, used to calculate a payment, such as a dividend or interest; face value
Book Value
Tangible net asset value; Equal to tangible net asset value per share.
Market Value
the current price at which the shares could be bought or sold in the marketplace.
Preferred Stock
An equity security that is entitled to receive dividends before the common stockholders.
Cumulative Preferred Stock
Stockholders are entitled to the current year's dividend and those dividends accumulated from prior years.
Participating Preferred Stock
Entitled to a specific dividend, but also participate with the common stockholders dividends. Fixed to a minimum, but not a maximum.
Convertible Preferred Stock
Can be converted into common stock.
Normally what is the par value of corporate bonds?
When do corporate bonds pay interest?
Corporate Bonds
A form of debt and a promise by the corp. to pay a sum of money at a specified future date along with interest payments.
Bonds selling for a price greater than par are said to be selling at a ________?
Bonds selling for a price less than par are said to be selling at a ________?
How much would a bond sell for if the quoted price was 103 3/4
103 full points x $10 = 1030
3/4 point x $10 = 7.50

Total Price = 1037.50
Mortgage Bonds
Secured by mortgages on real estate.
Equipment Trust Certificates
Issued by transportation companies and are secured by liens on equipment.
Debenture Bonds
Unsecured bonds
Subordinated Debentures
Subordinated in their claim on the assets of the corporation. The last type of debt to be paid off in a corp. liquidation.
Guarenteed Bonds
Bonds in which the payment of principal and interest is guarenteed by another corporation.
Income Bonds
Bonds where interest payments are only made if the corporation's earnings are sufficient.
Parity Price
The price the stock must sell at to be equal in value to the bond.
What is the order of payments in corporate liquidation
1. Taxes
2. Senior Lien Bonds(1st Mortgages)
3. Bank loans, accts payable, debentures, and other unsecured debt
4. Subordinate Debentures
5. Preferred Stock
6. Common Stock
Zero Coupon Bond
A bond that is purchased by an investor at a deep discounted price and the bond pays all of its interest at maturity.
Nominal Yield
The fixed interest rate printed on the bond or the face rate.
Current Yield
Annual interest rate on a bond divided by the current market price of the bond.
Yield to Maturity
Determines the rate of return a bondholder would receive, if the bond is held to the maturity date.
They allow a common stockholder to subscribe to a new issue of common stock before it is offered to the public.
A marketable option which gives the holder the long-term right to buy a certain number of common shares, at a specified price during a specific time period.
American Depositary Receipts (ADRs)
Receipts traded in the US that represent shares of a foreign company.
What is the purpose of Real Estate Investment Trusts?
To enable the smaller investor to invest in real estate.
Collateralized Mortgage Obligations (CMOs)
Bonds that represent a pool of mortgages. Normally $1000 and pay interest semi-annually.