Securities & Instruments
The things you can own. Stocks, bonds, funds, options, and the wrappers around them.
25 terms in this unit.
Common Stock
An ownership share in a company, with voting rights and last claim on assets.
Preferred Stock
Equity with a fixed dividend and priority over common, usually without votes.
Bond
A loan to an issuer that pays interest and returns principal at maturity.
Coupon Rate
The bond's stated annual interest as a percentage of par.
Yield to Maturity (YTM)
The total annualized return if you buy today and hold to maturity.
Par Value (Face Value)
The principal repaid at maturity, conventionally $1,000 per bond.
Duration
A bond's price sensitivity to a 1% change in interest rates.
Credit Rating
An agency's assessment of an issuer's likelihood of default.
High-Yield (Junk) Bond
A below-investment-grade bond paying more to compensate for default risk.
Treasury Securities
US government debt: bills, notes, and bonds.
Municipal Bond
State or local government debt, usually federally tax-exempt.
Mutual Fund
A pooled fund priced once daily at net asset value.
Exchange-Traded Fund (ETF)
A pooled fund that trades intraday on an exchange like a stock.
Index Fund
A fund that tracks a benchmark instead of trying to beat it.
Expense Ratio
The annual percentage of assets a fund charges to operate.
Net Asset Value (NAV)
A fund's per-share value: assets minus liabilities, divided by shares.
Call Option
The right to buy 100 shares at a set strike price before expiration.
Put Option
The right to sell 100 shares at a set strike price before expiration.
Strike Price (Exercise Price)
The fixed price at which an option can be exercised.
Option Premium
The price of the option contract: intrinsic value plus time value.
Covered Call
Selling a call against shares you already own to generate income.
Futures Contract
A standardized obligation to buy or sell an asset on a future date.
REIT
A company owning income real estate that must distribute 90% of taxable income.
Annuity
An insurance contract converting a premium into future income.
Money Market Fund
A fund of very short-term debt, managed for stability and liquidity.