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297 Cards in this Set
- Front
- Back
money market
|
company needs money for one year
|
|
capital market
|
company needs money for more than one year
|
|
equity securities
|
ownership positions in a company
|
|
earnings
|
profit
|
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dividends
|
quarterly check from company to stockholder based on earnings
|
|
underwriting firm
|
- investment banking firm
- the firm that helps the company do a public offering - promise to buy all stock the company is issuing & immediatly re-sell to investors |
|
security act of 1933
|
require company issuing securities to provide disclosure to investors in the form of a prospectus
|
|
spread
|
profit margin
|
|
quarterly report
|
10 - Q
|
|
annual report
|
10 - K
|
|
security exchange act of 1934
|
- People act
- requires issuers of security to file reports so public investors have enough info to decide to invest or stay invested |
|
secondary market
|
when shares trade back and forth among investors, and issuer does not get proceeds
|
|
underwriters work in the ________ market
|
primary
|
|
broker-dealers work in the _____ market
|
secondary
|
|
market makers
|
- broker-dealers who maintain an inventory of over the counter stocks
- they buy at the lower "bid" price and sell at the higher "ask" price - act as principles, which means they have money at risk |
|
dealer
|
- principle
- firm that sells stock from its inventory |
|
broker
|
firm that simply arranges the trade for a customer
|
|
A broker-dealer can be both on an individual trade
|
False
|
|
bonds
|
company simply borrows money from public investors & pays a rate of interest on loans/bonds until it is paid off
|
|
debit securities
|
bonds
|
|
convertable bonds
|
- slightly lower rate of return
- able to be converted into common stock at any time at a fixed agreed price per share |
|
rate of return
|
interest rate
|
|
bond parity price
|
number of stock shares the bond holder could buy that is worth exactly what the bond is trading for
|
|
dilution of equity
|
if convertable bond holders decide to convert, the earning pie will be cut into thinner slices
|
|
municiple bonds
|
- issues to cities and states to fund roads, schools, and projects
- tax free interest - lower interest rates |
|
revenue bonds
|
- backed by only revenue on sports stadiums, toll roads, issued by same municiplaity
- riskier than general municiple bonds, so they have higher yield |
|
small cap stock
|
- have relatively few shares outstanding
- have less established histories but potentially brighter futures - P/E ratios are high sonce much of the percieved value is built on speculation of future profits |
|
money market
|
- short term debt obligations that get paid back in 1 year
- very low risk |
|
money market examples
|
- commercial paper
- banker's acceptances - jumbo CD's |
|
equity options are....
|
- calls and puts
- high risk |
|
options
|
derivatives
|
|
buy a call
|
- if stock goes up in a hurry, the value of the call skyrockets
- if stock drops in a hurry, the call expires worthless and you lose |
|
buy a put
|
- make money when a stock flops
- example: buy @ 70, the stock drops to $10, your put would be worth the $60 difference and you bought it at $5 |
|
OCC disclosure document
|
layout all risks and characterists of options trading
|
|
ROP
|
Registered Options Principle
|
|
COP
|
- Code Of Procedure
- there to make sure you don't violate NASD's member conduct rules |
|
transfer agent
|
keeps ownership records of companies stock
|
|
registrar
|
audits/oversees the transfer agent
|
|
Calculate:
# shares outstanding |
# issued shares - # treasury shares
|
|
authorized shares
|
- # of shares a company has authorized itself to issue to the public
- disclosed in company charter |
|
issued shares
|
# of shares the company isitially offers to public
|
|
treasury stock
|
# of shares the company has bought back
|
|
EPS only applies to __________ shares
|
outstanding
|
|
_______ shares are the only ones that get a vote
|
outstanding
|
|
One benefit to cumulative voting
|
gives an equal (possibly upper) hand to the small/minority shareholder
|
|
residual claim on assets
|
when company is liquidated and there are residuals left for common stock holders
|
|
junior security is also known as....
|
- common stock
- all other securities represent senior claims |
|
why are common shares limited liability?
|
shareholders are shielded from debts of company and lawsuits
|
|
Do common stock holders have a claim on earnings and dividends?
|
yes
|
|
Who decides if a dividend is issued?
|
Only the board of directors
|
|
What three dates are associated with paying a dividend?
|
- declaration date: date the board decides to pay a dividend
- payable date: date the dividend will be paid - record date: date the investor has to own the stock to receive dividend |
|
The buyer has _______ when they become the official owner of the stock (with transfer agent)
|
settled
|
|
Stock transactions settle on the ____ business day.
|
3rd
|
|
regular way settlement
|
- T+3
- the 3rd business day after trade |
|
ex-dividend
|
- or ex-date
- date starting where investors who buy the stock will not receive next dividend |
|
NASD sets _____ as a function of T+3
|
ex-date
|
|
What are the dividend related dates that the board sets?
|
- Declaration date
- Record date - Payable date |
|
What are the dividend related dates that the NASD/NYSE sets?
|
Ex-date
|
|
The dividend comes out of what on the ex-date?
|
stock price
|
|
How can a dividen be paid?
|
- Cash (taxable)
- Stock (non taxable) - Shares of a subsidy - Product |
|
Are cash dividends taxable?
|
Yes
|
|
Are stock dividends taxable?
|
No
|
|
Own 100 shares @ $50, with a 5:4 split what is the new stock price?
|
Initial investment value
100 * 50 = $5000 Find total # of shares after split (100 * 5) / 4 = 125 Find new stock value after split $5000 / 125 = $40 |
|
You own 200 @ $40. Company offers 20% stock dividend. How many shares do you own, and at what price after the dividend?
|
Initial investment value
200 * $40 = $8000 Find additional shares added 20% * 200 = 40 Total shares you now own 40 + 200 = 240 Value of stock after dividend 8000 / 240 = $33.33 |
|
Why does a company do a split or dividend?
|
To push share price down
|
|
forward split
|
means you end up with more shares than you had, at a lower price
|
|
the purpose of a reverse stock split
|
replace stock to increase price
1:10, 1:5, etc etc |
|
Compare how much larger the stock price is, to the earnings associated with each share. What is that?
|
P/E or price to earnings ratio
|
|
Shareholders can vote on which type of stock split(s)?
|
Both forward and reverse
|
|
What is common stock?
|
% of company ownership
|
|
Preemptive right
|
common stockholder right to maintain their proportionate ownership in company
|
|
dilution of equity
|
the reduction in the percentage of a company represented by each share for an existing stockholder who has not increased his or her holding in the issue of new common stock
|
|
standby underwriting
|
when the company does a rights offering, there is an underwriter standing by willing to use the rights that no one else wants
|
|
warrant
|
- long term equity security
- there are no dividends attached to a warrant |
|
Warrants are often attached to a _________.
|
bond offering
|
|
preferred stock
|
- equity security that gets preferential treatment durning liquidation, and always receives dividends before owners of common stock
- preferred dividiend is printed on a certificate |
|
Par value of perferred stock
|
$100
|
|
The stated dividend of a stock is a % of ___________ .
|
par value
|
|
convertible stock
|
lets investors exchange one share of preferred stock for X number of common shares
|
|
preferred parity price
|
the # of common shares you could convert to, times the common stock price
|
|
If the preferred stock (at par) is convertable @ $10, how many common shares would that be? Express that as a ratio.
|
Divide par value by 10
$100 / $10 = 10 shares That is a 10:1 ratio |
|
If the preferred stock (at par) is convertable @ $20, how many common shares would that be? Express that as a ratio.
|
Divide par value by 20
$100 / $20 = 5 shares That is a 5:1 ratio |
|
Equasion to find preferred parity price
|
common stock price * first # in ratio = preferred parity price
|
|
Equasion to find parity price of common stock
|
preferred market price / first # in ratio = parity price of common
|
|
4% preferred stock is convertable @ 25. Currently it is trading @ 28. What is the ratio, preferred share price, and parity price of the preferred stock?
|
Preferred par value = $100
Find the ratio $100 / 25 = 4 Find preferred price $100 * 40% = $4 $4 + $100 = $104 Find the parity price 4 * $28 = $112 Parity value is $112, with a 4:1 ratio |
|
When interest rates go up, _______ prices usually go ______ .
|
stock prices usually go down
|
|
When interest rates go down, _______ prices usually go ______ .
|
stock prices usually go up
|
|
Does preferred stock have a maturity date?
|
Nope
|
|
Preferred stock usually gives an investor voting rights.
|
False
|
|
ADR
|
- American Depository Receipt
- foreign stock in a domestic market - owners are suject to currency risk, as there is a conversion being done |
|
A holder of ADR's right is.....
|
They have receipts tha represent 1 to 10 shares of the foreign stock, and have the right to exchange the ADR for actual foreign stock shares
|
|
sponsored ADR
|
corporation sponsors creation of ADR
|
|
ADS
|
- American Depository Shares
- Another name for a sponsored ADR |
|
REIT
|
- Real Estate Investment Trust
- company that owns a portfolio of properties and sells shares to investors |
|
What is the main intention of a growth investor?
|
looking for a share price to go up
|
|
What is the main intention of a income investor?
|
interested in dividend payouts
|
|
dividend yield
|
how much an investor has to pay to receive some amount of dividends
|
|
Calculate dividend yield
|
annual dividend / market price = dividend yield
|
|
Calculate quarterly dividend
|
Multiply dividend yield by 4
|
|
The stock with the lowest P\E is the cheapest stock.
|
True
|
|
Calculate total return on a dividend
|
dividend received + capital growth / appreciation = total return
|
|
If you buy@10 it the stock rises to 12, what is the capital appreciation? If the stock also pays a $1 dividend, what is your total return? Express that as a percentage also.
|
$12 - $10 = $2
$2 capital appreciation With $1 dividend, you made $3 Total return is "3 out of 10", thats a 30% return. |
|
If you are long 100 shares @50 and a 5:4 split is declared, How many shares and at what price would you now have?
|
Total investment value
100 * $50 = $5000 (after split, you must still have this value) (100 * 5) / 4 = 125 shares You will have 125 shares after split $5000 / 125 = $40 Each share would be worth $40 |
|
Another way to express bonds
|
debit securities
|
|
corporate bonds
|
represent loans from investors to the corporation, where the corporation pays the loan back with some stated interest amount
|
|
To use alot of borrowed money... is to
|
leverage
|
|
highly leveraged
|
finanaced operations by issuing a lot of debt because of borrowing a lot of money
|
|
why is it a junk bond
|
moeny borrowed at high rates of interest
|
|
bond face amount
|
the par value printed on the face of the bond certificate
|
|
bonds usually have a par value of .....
|
$1000
|
|
bond coupon rate
|
- also known as nominal yield
- interest rate the bond will pay each year |
|
Bonds usually pay __ times a _____, or _______ .
|
2 times a year, or semiannually
|
|
The interest rate a bond will yield is unknown.
|
False, it is a stated known thing.
|
|
How much will a 5% bond pay annually?
|
At par value
$1000 * 5% = $50 $50 per year |
|
Interest rates go up,
bond price goes ___, yields go ____ |
bond price goes down
yields go up |
|
Interest rates go down,
bond price goes ___, yields go ____ |
bond price goes up
yields go down |
|
Bond prices go up,
interest rates have gone ____, and yields go ______ |
interest rates have gone down yields go down
|
|
calculate current bond yield
|
take the annual interest rate paid by the bond to an investor (coupon rate), divide it by what an investor would have to pay for the bond
annual interest / market price = current yield |
|
express a bond yield
|
how much do I get every year compared to what I pay to get it
|
|
If the current bond yield is higher than the coupon rate, it is a __________ bond.
|
discount
ie: an 8% bond with a 10% current yield |
|
yield to maturity
|
(YTM) the theoretical return an investor gets if they hold the bond all the way to the maturity date
|
|
If you see a YTM that is higher than the coupon rate, you are looking at a __________ .
|
discount bond
|
|
The YTM would have to higher than the _________ to be a discount bond.
|
current yield
|
|
callable bond
|
after a certain period of time the issuer can buy the bonds back at a stated price
|
|
On a discount callable bond, what will get the highest yield?
|
yield to call the bond
|
|
premium bond
|
bond purchased at a higher rate than par value
|
|
If a bond pays $80 annual interest and has a price is $1200, what type of bond is it?
|
the bonds yield is
80 / 1200 = 6.7% @ par it would have been 80 / 1000 = 8% therefore it is a premium bond |
|
If you want to get a bond at premium you have to _______. But the yield will be ______ .
|
pay more than par
the yield will be lower than what it would have been at par |
|
If the bond has a lower YTC than its YTM, it is a __________ .
|
premium bond
YTC - yield to call YTM - yield to maturity |
|
On a discount bond the worst yield is....
|
YTM
|
|
On a premium bond the worst yield is ....
|
YTC
|
|
When someone purchases a bond, the confirmation must be sent no later than _______ .
|
T + 3, which is also the settlement date
|
|
On a bond confirmation you have to disclose the ___________ .
|
worst yield, given what type of bond it is
|
|
bond redemption date
|
- or maturity date
- date at which the bond pays no more |
|
bond tender offer
|
offer from the issuer to buy back the bond before maturity
|
|
bearer bonds
|
- issued long time ago
- bond with no name of who had possession, just a generic "pay to bearer" |
|
registered as to principle only bond
|
bond that has a name of who gets principle, but no name on interest coupons
|
|
fully registered bond
|
bond that has name of owner on both principle certificate and coupons
|
|
bonds are quoted by ________ or by ________ .
|
price or by their yield
|
|
bond interpolation
|
figuring out bond yield from price or bond price from yield
|
|
Another way to say bond price
|
bond points
|
|
One bond point is equal to....
|
$10
|
|
A bond selling at 98 means it is trading for how much?
|
98 * $10 = $980
it is trading for $980 |
|
A bonds basis points, is also....
|
the bonds YTM
(yield to maturity) |
|
trading at a basis of, really means.....
|
the bond price pushed the YTM to a particular %, or number of basis points
|
|
What do you know about a bond with an 8% coupon rate that just traded on a 7.92 basis?
|
the price of the bond has gone up above par, pushing the YTM down to 7.92%
|
|
Express 50 basis points as a percent
|
1/2 of 1%
1% = 0.0100 or 100 basis points, so 50 basis points would be half that |
|
Bond basis points use a __ digit system. Express 1% in terms of basis points.
|
4 digit system
1% = 0.0100 It would be 100 basis points. |
|
Bond trading at 7.92 basis means the YTM is _______ and that is expressed as ________ basis points.
|
7.92% YTM
7.92% = 0.0792 792 basis points |
|
Explain the following statement:
10m XYZ 8s debentures of '13, callable @ 103 in '08 |
10m = $10,000 par value or 10 bonds
XYZ = issuing company 8s = XYZ pays 8% annual interest, but the payments are made [s]emiannually callable @ 103..... = if interest rates drop in 2008, the company can by back the bond @ $1,030 |
|
Given the bond, 10m XYZ 8s what would an investor receive at maturity?
|
receive the last (semiannual) interest payment of $40, they owned 10 so $400
get the initial principle of the bond $1000 back, they own 10 so it would be $10,000. 10,000 + 400 = $10,400 as a final payment |
|
A corporate bond has a settlement date of
|
T + 3
|
|
A miniciple bond has a settlement date of
|
T + 3
|
|
A treasury bond has a settlement date of
|
T + 1
|
|
On both corporate and miniciple bonds how is the annual interest expressed daily?
|
Divide by 360 days
|
|
On treasury bond how is the annual interest expressed daily?
|
Divide by actualy days in a year
|
|
On both corporate and miniciple bonds how is the monthly interest expressed daily?
|
divide by 30 days
|
|
If a corporate bond pays $80 annual interest, how much is that per day?
|
$80 / 360 = $0.222 per day
|
|
For a semiannual bond that pays on M & S, what day and months would you receive payment?
|
the first of March and September
|
|
For a semiannual bond that pays on J & J, what day and months would you receive payment?
|
the first of January and July
|
|
For a semiannual bond that pays on A & O15, what day and months would you receive payment?
|
The 15th of August and October
|
|
For a semiannual bond that pays on M & N3, what day and months would you receive payment?
|
The 3rd of May and November
|
|
A bond holder earns interest only on business days.
|
False. Bond earn interest everyday, including weekend and holidays.
|
|
bond accrued interest
|
the buyer has to pay the seller the price of the bond, plus the interest that belongs to the seller, who hasn't gotten a check since the last payment date
|
|
Dale sells Jim XYZ 8% A&O bond on wednesday Jun 19. How much accrued interest must be paid, and who pays it?
|
Jim pays interest @ $18.44 per bond
|
|
another name for treasury bonds
|
government securities
|
|
A J & D 5% government bonds trades on Wednesday August 14. How much accrued interest will the buyer pay the seller?
|
$10.27 per bond
|
|
long coupon
|
if bond pays J & J as is issued in march but doesn't make first payment until January
|
|
Debbie sells her 6% J & J bond on thursday March 14. How many days of accrued interest will she pay for this transaction?
|
Zero. Its the buyer who pays the seller.
|
|
What is true about a bond with an 8% coupon trading at a 10% YTM?
|
It is trading at a discount. Whenever yield trades higher than the coupon, it is a discount.
|
|
One reason that a bond is considered a premium bond?
|
Yield is trading lower than the coupon
|
|
serial maturity
|
a little bit of the principle will be returned each year until it is paid off
|
|
Do long term bonds typically yield more than short term bonds?
|
Yup
|
|
yield curve
|
the graphed curve of % yield vs term to maturity
|
|
When the yield spread narrows, what is that an indicator of?
|
the economy is doing good, becuase there is higher demand for higher-rated bonds than low-rated bonds
|
|
a wide yield spread means....
|
the low-rated bonds are at a higher yield than high-rated bonds
|
|
credit risk
|
- the risk of default
- measured by moody's and standard & poor's |
|
treasury debt carries some risk
|
false. no risk.
|
|
corporate bonds carry default risk
|
true. they carry major default risk
|
|
one characteristic of junk bonds
|
- high yield
- big default risk |
|
event risk (for the bondholder)
|
the chance that the corp whose bonds you own, is aquired by another who is highly leveraged
|
|
interest rate risk
|
- risk that rates will suddenly shoot up, sending your bond market price down
- the longer the term on the bond, the more volatile its price |
|
when interest rates go up bond prices ___________ .
|
fall
|
|
purchasing power risk
|
(has to do with inflation) if inflation erode the value of money, an investor's return supply isn't what it originally was
|
|
when inflation is rising you are better off with ________ .
|
equities (stock)
|
|
bond call risk
|
risk that interest rates will drop and bondholders will have their bonds called
|
|
reinvestment risk
|
is a bond is called, you have to reinvest. but this time (unfortunatly) at a lower rate.
|
|
If bond prices are low, interest rates are _______ .
|
high
|
|
secured bonds
|
the issuer pledges title of the assets to trustee, who might end up selling them off if the issuer gets behind on its interest payments
|
|
secured creditors
|
- investors who buy secured bonds
- they are the first to get paid if the company defaults |
|
mortgage bond
|
if the collateral used for the bond is real estate
|
|
collateral trust certificate bond
|
the collateral for the bond is securities
|
|
equipment trust certificate bond
|
the collateral for the bond is equipment
|
|
Most corporate bonds are backed by __________ .
|
full faith and credit of issuer
|
|
Bonds are rated by ______ .
|
S&P and Moody's
|
|
AAA rating will usually offer a big coupon payment
|
false
|
|
what is true of BBB rated bonds?
|
should offer higher pay-off in exchange for buying bonds that are on notch about "junk"
|
|
debenture bond
|
bond backed only by "full faith" of creditor
|
|
debenture bond holders get paid after ____________ ,
|
secured bond holders
|
|
subordinated debentures
|
- below debentures on payout "ladder"
- carry higher coupon rate than debenture |
|
income bond
|
- only pays if company has income
- usually offered by company coming out of bankrupcy |
|
3 organizations that offer bond ratings to gauge default likelihood
|
- S&P
- Moody's - Fitch |
|
S&P can use __ or __ signs along with the AAA or BBB rating
|
+ (plus)
- (minus) |
|
Moody's can use __ or __ signs along with the Aa or Bb rating
|
1, 2, or 3
|
|
Lowest rated bond for Moody's
|
Baa3
|
|
Lowest rated bond for S&P
|
BBB-
|
|
sinking fund
|
fund company sets up to escrow funds used to ultimatly pay the principle back on matured bonds
|
|
refunding bond
|
- replacing one bond issue with another
- usually happens when interest rates drop |
|
callable bond yield more than non-callable
|
true
|
|
if a bond has a warrant, what do you know about the yield?
|
you will get a lower yield
|
|
convertable bonds
|
bond that can be converted into common stock
|
|
bond par value
|
$1,000
|
|
if bond has convertable price of $40, how many shares will you get at par?
|
25 shares
|
|
who sets a convertable bonds conversion price?
|
issuing company
|
|
how can you know a convertable bond's worth at any given time?
|
the amount of shares it will buy in common stock
|
|
parity (in terms of convertable bonds)
|
when the bond trades for exactly what the conversion price is
|
|
If a bond is convertable at $40, what is its relationship to the common stock?
|
25:1
par / conversion price 1000 / 40 = 25 |
|
If a bond is convertable at $25, what is its relationship to the common stock?
|
40:1
1000 / 25 = 40 |
|
bond price goes up, rates go ____.
|
down
|
|
What types of debts can you buy from US Treasury?
|
- bill
- note - bond |
|
T-bills pay back _______
|
face value
|
|
describe bid
|
discount the buyers are trying to get
|
|
describe ask
|
discount the sellers are willing to give up
|
|
What time frame does a T-Bill mature
|
one year or less
|
|
Do T-Bills have coupon payments?
|
nope
|
|
zero coupon bond
|
pays difference between the discounted pruchase price and face amount
|
|
T-Bills are offered in what incraments?
|
$1,000's
|
|
When are T Bills auctioned off by Fed?
|
Every monday
|
|
When a T Bill is auctioned off, when is the discount rate determined?
|
at auction time
|
|
T Notes are offer in what increment maturities?
|
2 year and 10 year
|
|
T Bonds are offered in what intrement maturities?
|
10 year and 30 year
|
|
When is the interest payment for a T Bill?
|
Semiannually
|
|
T Bonds are quoted in what fraction?
|
32nds
|
|
Express the T Note 98.16 in dollars
|
98.16 = $980 + 16/32
16 * .3125 = 5 980 + 5 = $985 |
|
Express the T Bond 98.24 in dollars
|
98.24 = $980 + 24/32
24 * .3125 = 7.5 980 + 7.5 = $987.50 |
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A 30 year T Bond is callable when?
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Last 5 years
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STRIPS
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- Seperate Trading of Regulated Interest and Principle of Securities
- Pay a known amount now and receive a known amount later |
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Treasury receipt is almost the same thing as a _________ . Difference is a treasury receipt ________ by the government.
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STRIP
not guaranteed by government |
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TIPS
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Treasury Inflation Protected Security
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When inflation goes up, a TIP is worth ______
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more
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When inflation goes down, a TIP is worth ______
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less
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I Bond
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- saving bond issued by the US treasury
- pays guaranteed rate by government but also pays more interest when inflation rises |
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An I Bond is exempt for both state and local taxes
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true
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GNMA
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- Ginnie Mae
- mortgaged backed security - backed by full faith of US government - only one that pays out check monthly |
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FNMA
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Fannie
mortgaged backed security public company |
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FHLMC
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Freddie Mac
mortgaged backed security public company |
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federal farm credit system FFCS
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- is not guaranteed by US Treasury
- sells debt securities to raise funds for farmers - pay semiannually |
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CMO
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- collateralized mortgage obligation
- sold by companies that sell mortgage backed securities - usually AAA rated - not very liquid |
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what is a "tranche"
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another work for "slice" of opportunity
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What are the 2 types of CMO?
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PAC - planned amortization class
TAC - targeted amortization class |
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PAC protects against what?
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prepayment and extension
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TAC protects against what?
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prepayment only
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one characteristic of money market security
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- very liquid
- mature one year or less - low interest rate - no inflation protection |
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Examples of short tem municiple notes
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TAN (most common)
BAN RAN |
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Characteristics of negotiable cd's
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- $100,000 min
- excess insured by FDIC |
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What is a repurchase agreement?
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we'll buy it right back for more money
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bankers acceptance
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facilitates foreign trade, and matures in 270 days max
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commercial paper
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- unsecured note
- issued by corporations - 270 days max maturity |
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general obligation bond
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legal obligationof a local government to pay back the bond holders out of the "general fund" (usually property taxes)
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revenue bonds
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project will end up generating revenue to pay for itself
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spread
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buy bonds from issue and then re-sell them to the public for profit
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normal yield curve bond
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bond with long er maturity will yield more than those with shorted maturity
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net interest cost (NIC)
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represents total cost of borrowing
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true interest cost (TIC)
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represents total cost of borrowing
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bond points are worth $___
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10 bux
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GO bond
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general obligation bond
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GO bond characterists
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- backed of full faith of municipality
- require voter approval - ad valorem = property taxes - millage is associated with - mill=thousand 7mills=7 to the thousandth - limited tax bond |
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revenue bond characterists
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- does not have full faith of municipality
- specific source of revenue - property tax can not be used - does not need voter approval - special tax bond |
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What two bond are considered some of the safest?
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PHA - public housing authority
NHA - new housing authority |
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industrial development revenue bond
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backed by the occupying corpoation's full fiath and credit
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indenture-bond resolution
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issuer makes promises know as protective covenants
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double barrel bond
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anything backed by two sources of debt service; this is considered a GO bond
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moral obligation bond
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provides for the possiblity of the issuer going to the legislature and convince to honor the "moral obligation" to pay off debt
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anticipation notes
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meaning the notes will be paid off by some money thay anticipate receiving soon
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tax anticipation note TAN
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borrow money backed by anticipation of collecting taxes in near future
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revenue anticipation note RAN
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borrow money backed by anticipation of collecting revenue soon
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bond anticipation note BAN
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"we'd like to borrow some money becuase we are about to borrow some money"
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federal government to a municiple bond
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T-bill
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refunding
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replacing expensive debt with cheaper
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once a bond is advanced funded is has what rating?
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AAA
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bond counsel
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law firm specializing in public finanace and complexity of bond issues
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two types of opnion from bond counsel
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- qualified: means that something is in doubt and need to be "qualified"
- unqualified: everything checked out |
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bond underwriters
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buy muni-bonds then resell to capital markets, keeping the spread
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how do munciplaities find bond underwriters?
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The bond buyer
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NIC
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- net interest cost
- lowest cost municipality has to pay to underwriter to borrow money |
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TIC
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- true interest cost
- factors in time value of money |
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bond syndicate
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group of bond buyers from municipality
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what order does the spread get distributed in the syndicate?
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1. underwriter acting as manager
2. underwriter expenses 3. syndicate members: additional takedown 4. concession: whoever actually sells bond |
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bond selling group
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group of sellers outside the syndicate, helling to sell bonds
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if a bond is worth $10, 1/2 a point is worth...
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5 bux
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if a bond is worth $10, 1/8 of a point is worth...
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$1.25
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western syndicate account
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member only has to worry about selling their share of bonds
- Western walks - |
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eastern syndicate account
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members are responsible for selling their bonds, as well as their share of any unsold bonds
- Eastern eats - |
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oversold bond
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when there are more buyers than bonds to be sold
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another word for oversold
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oversubscribed
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the order for allocating oversold municiple securities
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1. Pre-sale
2. Syndicate 3. Designated 4. Member Please Sell Da Muni's |
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official bond statement
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detailed info about bond issuers financial condition
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