AFM 121 TERMS ( AFTER MIDTERM)

Market order:

executed order at the best available price ( not set price)

Limit order:

executed only if a specific price can be obtained

Day order:

order only valid today

Open or good till cancelled:

order out there until stock was bought or specific date

All or non:

executed only if total # of shares can be bought or sold at the same time ( buy 100 needs too be 100)

Stop loss order

market order to sell if price drops

Stop buy order:

an order to buy a stock once its price rises to a specific level.

Good through order:

an order that stays active until a specific date unless it is executed or canceled.

Any part order:

an order that allows the broker to buy or sell only part of the total shares requested.

Stock index:

is a measure that shows the overall performance of a group of stocks in a market, such as the S&P 500, where large companies like the Magnificent Seven have a very strong influence on the index.

Stock avg

is the average price of a selected group of stocks used to represent overall market performance, such as the Dow Jones Industrial Average, which is based on 30 major U.S. companies.

What is dividend yield?

is the annual dividend divided by the stock’s share price, showing the percentage return investors get from dividends and allowing an “apples-to-apples” comparison between stocks.

Preferred shares

provides a cash payment/dividend, not ownership, fixed cash payment, most attractive to investors who want steady income/ fixed income, lot of volatile ( how to value we will learn)

Common shares

 equity in company, value of each shares changes, very high or very low ( voting rights, most people own)

Bonds

is a secured investment that pays periodic coupon (interest) payments and returns the principal at a specified maturity date.

Debentures

is a bond that pays interest and principal at maturity but is not secured by specific assets, relying instead on the issuer’s creditworthiness ( no collateral)

Coupon payment

Time generated payments ( every months)

Principal//face value

1. Amortized paid at maturity

Bond coupon rates:

• Can either be floating ( can be adjusted) or fixed ( never changes)

• Payments made during the period

Bond maturity:

how long its outstanding ( due/payable in 5 years)

• Principal repaid

Callable bond:

is a bond that allows the issuer to repay the bond early before the maturity date.

Retractable bond:

is a bond that allows the investor to demand early repayment from the issuer before the maturity date.

sinking fund (purchase fund)

is money set aside by the issuer to gradually repay part of a bond issue before maturity.

Convertible bonds:

is a bond that can be converted into a specified number of shares of the issuing company’s stock.

Protective provisions:

are rules in a bond agreement that protect bondholders by restricting certain actions of the issuer.

Covenants:

are conditions in a bond agreement that the issuer must follow to protect bondholders.

names

Us = treasury bonds

• Canada; bonds = Canadas

• Germany; bonds = bunds

• Uk; bonds = gilts

Treasury bills =

are short-term government securities that mature in one year or less.

Marketable bonds

are bonds that can be bought and sold in financial markets before maturity.

Real return bonds

are bonds whose payments are adjusted for inflation.

Short term corporate borrowing:

is when a company borrows money for a short period, usually less than one year, to meet its immediate financial needs. ( happened 2009 financial crisis)

Strip bond

is a bond that pays no interest and is sold at a discount, then redeemed at full value at maturity.

Proprietorship;

is a business owned and operated by one person. ( not a separate legal entity)

Partnership:

a business similar to a proprietorship but with two or more owners who share profits and responsibilities. ( limited liability)

Limited Liability Partnership (LLP)

is a partnership where partners are not personally responsible for the business’s debts beyond their investment.

General partnership:

a partnership where all partners have unlimited personal liability for the business’s debts.

Corporations

a business where ownership is separate from management, shares can be bought or sold, and owners have no personal liability.

Shareholders’ rights

are the rights of shareholders to vote on company matters and share in the company’s profits.

Proxy

is a person authorized to vote on behalf of a shareholder at a company meeting. ( 1 time thing)

Financing process

the process where investment dealers help transfer money from investors to governments or corporations that need funding.

Private placements:

selling securities directly to private investors without requiring a prospectus.

Prospectus

is a legal document that provides detailed information about a security being offered to investors.

Public offerings

the sale of stocks or bonds to the public in financial markets using a prospectus.

A greensheet ( rbc = bluesheet)

a short marketing document that summarizes key information about a security for salespeople and investors.

Book building:

the process where investment dealers gather investor feedback and negotiate the price of a security before it is issued.

Bought deal:

when an investment dealer buys the entire security issue from the issuer and then sells it to investors.

Marginal tax rate:

the tax rate applied to the last dollar of income earned.

Interest income:

money earned from investments or savings (like bonds or bank accounts) and taxed at the marginal tax rate.

Dividend tax

the tax applied to income received from dividends paid by companies to shareholders.

Capital gains:

profit earned when an investment or asset is sold for more than its purchase price.

Short selling

selling a borrowed security expecting the price to fall so it can be bought back later at a lower price.

Short squeeze

when a rising stock price forces short sellers to buy back shares quickly, pushing the price even higher.

Market order

an order to buy or sell a security immediately at the best available market price.

Buying a stock

IF U WANT TO BUY GO TO SELLER

Selling a stock

SELLING LOOK FOR BUYERS

non-registered account

A regular investment/trading account with no contribution limit; all gains are taxed.

RRSP ( retirement fund)

A tax-deferred retirement savings account (contributions reduce taxable income; withdrawals are taxed)

• Contribution is Tax deductibility

  • 100k tax income

  • 10k contribution

  • Only get taxed on 90k

TFSA ( tax free saving account)

A tax-free savings account where growth and withdrawals are not taxed, starts at 18, Max contribution 7k, not tax deductible, investment inside not taxed

FHSA ( first homebuyer)

A tax-advantaged savings account for first-time home buyers, You also get contribution tax deductible, So it lowers your tax income, max 40,000, yearly 8k

Real rate of return

Return after adjusting for inflation

Cash flow

Money received from an investment (dividends/interest)

Business risk

Risk related to a company’s operations

• td bank money fraud = business risk

Liquidity risk

Risk of not being able to sell quickly

• if you don’t have a buyer of the assets  ( you want lots of volume)

Default risk

Risk that a borrower won’t repay

• Bankrupt

Systematic risk

Market-wide risk that cannot be diversified away

Non-systematic risk

Company-specific risk that can be diversified away

Standard deviation

Measure of how much returns vary

Beta

Measure of a stock’s sensitivity to the market

• HIGHER BETA = the GREATER ITS RISK is relative to the OVERALL MARKET

• how sensitive a stock’s returns are to overall market movements (i.e., its level of systematic risk).

Nominal rate of return

The return on an investment before adjusting for inflation