investments

Equity Securities

Financial instruments representing ownership in a company, varying in characteristics and rights.

Common Stocks

Represent partial ownership in a company and usually entitle the holder to one vote per share; dividends are contingent on profitability.

Preferred Stocks

Stocks that promise fixed income but are not obligated to pay annually; have priority over common stocks for unpaid dividends.

American Depositary Receipts (ADRs)

Internationally traded financial instruments representing shares in foreign companies.

Limited Liability

Protection for stockholders that confines their maximum loss to their original investment.

Fundamental Analysis

The process of assessing a company’s intrinsic value through evaluation of its financial health and potential for future profitability.

Capital Asset Pricing Model (CAPM)

A model to determine the required rate of return based on risk factors including the risk-free rate and investment beta.

Bond Pricing

The process of calculating the intrinsic value of a bond based on present value of coupon payments and par value.

Yield to Maturity (YTM)

The interest rate that equates the present value of a bond’s expected payments to its market price.

Cyclical Industries

Industries highly sensitive to economic fluctuations, such as those dealing with durable goods.

Defensive Industries

Sectors less sensitive to economic changes, maintaining stable performance regardless of market conditions.

Dividend Discount Models (DDM)

Models that compute intrinsic value based on expected future dividends.

P/E Ratio

The ratio of a company's current share price compared to its earnings per share.

Comparative Analysis of Returns

Analysis highlighting the relationship between reinvestment rates and realized compound returns.

Efficient Market Hypothesis (EMH)

The theory stating that stock prices reflect all available information.

Accrued Interest

The interest accumulated on a bond since the last coupon payment, calculated to determine transaction costs.

Maturity of Treasury Notes

Range from 1 to 10 years for Treasury Notes and 10 to 30 years for Treasury Bonds.

Holding-Period Return (HPR)

The total return on an investment over a specific period, including dividends and price appreciation.

Industry Analysis

An evaluation of the health of an industry as it relates to firm performance.

Random Walk Hypothesis

The theory proposing that stock price changes are random and unpredictable.

Liquidity Ratios

Financial metrics that measure a company's ability to cover its short-term obligations.