series 7.txt

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series 7.txt
2011-04-22 16:02:18
financial terms

series 7 financial questions
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  1. What is a Variable Annuity
    A contract issued by an insurance company that is both a security and an insurance product. The annuitant's contributions are invested through the separate account into a portfolio of securities. The annuitant's payments depend largely on the investment results of the separate account.
  2. What is a vertical spread?
    The simultaneous purchase and sale of two calls or two puts on the same underlying security, that only differ in strike price.
  3. Accumulation stage
    The period during which an annuitant is making contributions to an annuity contract.
  4. Account Executive (AE)
    also known as a Registered Representative is an individual who is duly licensed to represent a broker dealer in securities transactions or investment banking business.
  5. What are the two potential meanings of an Administrator?
    • 1. An individual authorized to oversee the liquidation of an estate of a decedent.
    • 2. An individual or agency that administers securities' laws within a state.
  6. Advertisement
    • Any material that is distributed by a broker dealer or issuer for the purpose of increasing business or public awareness for the firm or issuer. The broker dealer or issuer must distribute advertisements to an audience that is not controlled. Advertisements are distributed through any of the following:
    • .Newspapers/Magazines
    • .Radio
    • .TV
    • .Billboards
    • .Telephones
  7. Affiliate
    An individual who owns 10% or more of the compony's voting stock. In the case of a DPP, this is anyone who controls the partnership or is controlled by the partnership.
  8. Direct Participation program (DPP)
    An entity that allows all taxable events to be passed through to investors including limited partnerships and subchapter S corporations.
  9. Sub Chapter S Corporations
    A business organization that allows the tax consequences of the organization to flow through to the owners.
  10. American Depository Receipt/American Depository Secutiys (ADR's,ADS's)
    A receipt representing the beneficial ownership of foreign securities being held in trust overseas by a foreign branch of a US bank. ADR's facilitate the trading and ownership of foreign securities and trade in the US on an exchange or in the over the counter markets.
  11. American Stock Exchange (AMEX)
    An exchange located in New York using the dual auction method specialist system to facilitate trading in stocks, options and exchange traded funds and portfolios. The AMEX was acquired by the NYSE Euronext and is known part of NYSE Alternext.
  12. Amortization
    An accounting method taht reduces the value of an asset over its project useful life. Also the way that loan principal is systematically paid off over the life of a loan.
  13. Annuitant
    An individual who receives scheduled payments from an annuity contract.
  14. Annuitize
    A process by which an individual converts from the accumulation stage to the pay out stage of an annuity contract. This is accomplished by exchanging accumulation units for annuity units. Once a pay out option is selected it cannot be changed.
  15. Annuity
    A contract between an individual and an insurance company that is designed to provide the annuitant with lifetime income in exchange for either a lump sum or period deposits into the contract.
  16. Annuity Unit
    An accounting measure used to determine an individual's proportionate ownership of the separate account during the pay out stage of the contract. The number of annuity units owned by an individual remains constant and their value, which may vary, is used to determine the amount of the individual's annuity payment.
  17. Asset
    Anything of value owned by an individual or a corporation.
  18. Asset Allocation Fund
    A mutual fund that spreads its investments among different asset classes, i.e. stocks, bonds, and other investments based on a predetermined formula.
  19. Two definitions of an Assignment
    • 1. The transfer of ownership or rights through a signature.
    • 2. The notification given to an investor short an option that the option holder has exercised their right and now must meet their obligations as detailed in the option contract.
  20. Assignee
    A person to whom the ownership of an asset is being transferred.
  21. Authorized Stock
    The maximum number of shares that a corporation can sell in an effort to raise capital. The number or authorized shares may only be changed by a vote of the shareholders.
  22. Average Cost
    A method used to determine the cost of an investment for an investor who ahs made multiple purchases of the same security at different times and prices. An investor's average cost may be used to determine a cost base for tax purposes or to evaluate the profitability of an investment program sucvh as dollar cost averaging. The formula used to determine average cost is: Total dollars invested/number of shares purchased.
  23. Average Price
    A method used to determine the average price paid by an investor for a security that has been purchased at different times and prices such as through dollar cost averaging. An investor's average price is determined by using the formula: Total of purchase prices/ The number of purchases.
  24. Balloon Maturity
    A bond maturity schedule taht requires the largest portion of the principal to be repaid on the last maturity date.
  25. Bearish
    An investors belief that prices will decline.
  26. Bearer Bond
    A bond that is issued without the owner's name being registered on the bond certificate or the books of the issuer. Whoever has possession (Bears) the certificate is deemed to be the rightful owner.
  27. Bid
    A price that an investor or broker dealer is willing to pay for a security. It is also a price at which an investor may sell a security immediately and the price at which a market maker will buy a security.
  28. Board of Directors
    A group of directors elected by the stockholders of a corporation to appoint and oversee corporate management.
  29. Board of Governors
    The governing body of FINRA. The board is made up of 27 members elected by FINRA's membership and the board itself.
  30. Bond
    The legal obligation of a corporation or government to repay the principal amount of debt along with interest at a predetermined schedule.
  31. Bond Fund
    A fund whose portfolio is made up of debt instruments issued by corporations, governments and/or their agencies. The funds investment objective is usually current income.
  32. Book Value
    A corporations book value is the theoretical liquidation value of the company. Book value is in theory what some one would be willing to pay for the entire company.
  33. Buy stop order
    A buy stop order is used to protect against a loss or to protect a profit on a short sale of a stock.
  34. Callable Bond
    A bond that may be called in or retired by the issuer prior to its maturity date.
  35. Callable Preferred
    A preferred share issued with a feature allowing the issuing corporation to retire it under certain conditions.
  36. Call Spread
    An option position consisting of one long and one short call on the same underlying security with different strike prices, expirations or both.
  37. Capital Risk
    The risk that the value of an asset will decline and cause an investor to lose all or part of their invested capital.
  38. Cash Equivalent
    Short term liquid securities that can quickly be converted into cash. Money market instruments and funds are the most common examples.
  39. Churning
    Executing transactions that are excessive in their frequency or size in light of the resources of the account and for the purpose of generating commissions. Churning is a violation of the Rules of Fair Practice.
  40. Class A share
    A mutual fund share that charges a front end load.
  41. Class B Share
    A mutual fund share that charges a back end load.
  42. Class C Share
    A mutual fund share that that charges a level load.
  43. Class D Share
    A mutual fund share that charges a level load and a back end load.
  44. Close
    The last price at which a security traded for the day.
  45. Closed end Investment Company
    A management company tha issues a fixed number of shares to investors in a managed portfolio an whose shares are traded in the secondary market.
  46. Mutual Fund (Open end investment company)
    An investment company that invests in and manages a portfolio of securities for its shareholders. Open end mutual funds sell its shares to investors on a continuous basis and must stand ready to redeem its shares upon the shareholders request.
  47. Collateral
    Assets pledged to a lender. If the borrower defaults, the lender will take possession of the collateral.
  48. Collateralized Mortgage Obligation (CMO)
    A corporate debt security that is secured by an underlying pool of mortgages.
  49. Combination
    An option position with a call and a put on the same underlying security with different strike prices but the same expiration month.
  50. Consumer Price Index (CPI)
    A price-based index made up of a basket of goods and services that are used by consumers in their daily lives. An increase in the CPI indicates a rise in overall prices while a decline in the index represents a fall in overall prices.
  51. Conversion Price
    The set price at which a convertible security may be exchanged for another security.
  52. Convertible Bond
    A bond that may be converted or exchanged for common shares of the corporation at a predetermined price.
  53. Convertible Preferred Stock
    A preferred stock, which may be converted or exchanged for common shares of the corporation at a predetermined price.
  54. Corporation
    A perpetual entity which survives after the death of its officers, directors, and stockholders. It is the most common form of business entity.
  55. Covered Call
    The sale of a call against a long position in the underlying security. In essence, the trader is limiting his profit on the long position in exchange for receiving the option premium.
  56. Covered Put
    The sale of a put against a short position in the underlying security or against cash that will allow the person to purchase the security if the put is exercised. In essence, the trader is limiting his profit on the short position in exchange for receiving the option premium.