Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
18 Cards in this Set
- Front
- Back
|
Preferred stock |
-Form of ownership or equity. Market prices: -Heavily influenced by interest rates. -Does not fluctuate as actively as common stock prices. -Considered a fixed income security. -Fixed dividends. -Negotiable security. |
|
|
Par value |
Face value. Typically $100 for preferred stock. - Could also be $25 or $50. Never flex Dividend rate based on par. |
|
|
Preferred stock dividends |
Must be approved by the BOD. Typically paid on a semi annual basis. |
|
|
Preferred stock dividends |
Must be approved by BOD. Must be paid before common stock dividends. |
|
|
Cumulative preferred stock |
-The issuer must eventually pay skipped dividends. -Beneficial feature for investors. -Lower rates of return (vs. straight). |
|
|
Straight (non-cumulative) preferred stock |
-Issuer does not pay skipped payments. -Beneficial feature for the issuer. -Higher rates of return (vs. communitive). |
|
|
Fixed dividend rate |
Known as a "Coupon" |
|
|
Yield |
-Represents overall rate of return. -Based on market price and dividend rates. -Continually fluctuates. -Yield and market price are inverses: -Low market price equals high yield. -High market price equals low yield. |
|
|
Dividend rate |
- Based on par. - Never changes. |
|
|
Current yield formula |
CY = dividend annual income ÷ market price. |
|
|
Market price |
-Discount = trading below par. -Premium = trading above par. |
|
|
Interest rate fluctuations versus fixed income |
-Interest rates up market prices down. - Interest rates down market prices up. |
|
|
Raising interest rates |
Fixed income market prices decline due to competition. |
|
|
Falling interest rates |
Fixed income market prices increase due to competition |
|
|
Capital gain |
Return received selling an investment at a higher price than its original cost making a gain on a sale. |
|
|
Cost of money |
Interest Rate |
|
|
Inflation Risk |
Purchasing power |
|
|
Participating preferred stock |
- Eligible to receive more than the stated dividend rate - Issuers pay more and profitable a year's -Beneficial feature for the investor -Lower dividend rate (vs non-participating shares) -Trades at a higher price and lower yields. |
