Flashcards
Community property with rights of survivorship (CPWROS) is a fairly new legal designation and was created by the California legislature in 2001. Community property with rights of survivorship is a form of holding title to assets that is only available to married couples and only in community property states. Community property with rights of survivorship is a legal distinction that allows two spouses to equally share assets through marriage as well as pass on assets to the other spouse upon death without going through probate.
In a short margin account the credit balance consists of the client’s short sale proceeds plus the 50% equity they must deposit to open up the trade.
A type of group term life insurance that can pay off or reduce the balance of a consumer loan or a loan for the purchase of consumer goods in the event of the insured’s death. Credit life is decreasing term insurance, meaning that over time the death benefit amount tracks with the loan balance due. If the borrower dies with the loan outstanding the credit life policy will pay the balance due.
Credit risk is also called financial risk. Credit risk is related to the financial health of the issuer. Credit risk is a type of nonsystematic risk.
The credit spread is the difference between the cost that two issuers must pay to issue debt of the same maturity. Commonly the credit spread compares the cost associated with issuing debt for the U.S. Government versus a U.S. corporation. The narrowing of the credit spread is positive, whereas the widening is a negative sign for the economy.
There is also an options position known as a credit spread. A credit spread involves the purchase of an option and the sale of an option (buy/sell call, or buy/sell put), on the same stock. The two options will be different in strike prices, expiration dates, or both. In a credit spread, more money is collected for the sale of the option than paid for the purchase of the option. In a credit spread, the client is hoping that the spread will narrow and the options will expire unexercised.
A crypto key is a piece of information, usually a string of numbers or letters that are stored in a file which, when processed through a cryptographic algorithm, can encode or decode cryptographic data. There are public keys, such as an email address, and private keys, which use an alphanumeric code such as a password that is used to access the investor’s cryptocurrency.
These are platforms that allow users to trade cryptocurrencies (and, in some cases, other assets). Platforms serve as centralized intermediaries that enable trading and recording of ownership of cryptocurrencies, as well as facilitate holding cryptocurrencies.
A crypto wallet is a type of software that can be installed on any internet-connected device that stores the investor’s public and private crypto keys. Cryptocurrency wallets include desktop wallets, mobile app wallets, and online wallets.
Cryptocurrency, or crypto, is a broad term for any virtual currency that represents a stored value secured through cryptography, which uses highly sophisticated encryption techniques to store and pass information.
Cumulative preferred stock is a type of preferred stock that has a special feature. When an investor owns cumulative preferred stock, if the issuer should skip a dividend, the omitted dividend must be paid, along with the current dividend to the preferred stockholder, and then the issuer may distribute dividends to common stockholders. Cumulative preferred stock has a lower fixed dividend rate than straight preferred stock due to this special feature.
Cumulative voting is a type of shareholder voting in which the number of shares held is multiplied by the number of directors to be elected to determine the number of votes a shareholder may cast. With cumulative voting, the shareholder may allocate the votes in any way, including casting them all for one director. Cumulative voting is more beneficial for small shareholders than statutory voting.
Current assets include cash, accounts receivable, and inventory. Current assets are cash or expected to be cash in the next 12 months.
Current dollars are actual dollar amounts. Current dollars are not adjusted for inflation.
Current liabilities include accounts payable and accrued expenses. Current liabilities are monies owed in the next 12 months.
Current assets divided by current liabilities is a company’s current ratio. The current ratio is good for comparison purposes between companies of differing sizes. It is a measurement of liquidity. The higher the ratio the better.
Current yield is a stock’s annual dividends divided by its current market price. On a bond, the current yield would be the bond’s annual interest divided by the current market price.
A custodial account is used for minor children. Minor children cannot hold securities in their names.
The Investment Company Act of l940 requires the fund’s assets to be held by an independent custodian. The custodian is responsible for the safekeeping of all securities and cash held by the fund. Typically, a commercial bank will perform the duties of a custodian, as appointed by the directors. The securities in the portfolio are registered to the custodian.
Custody includes having physical custody of a customer’s cash and/or securities, or having the authority to obtain possession of them.
Cyclical industries expand during an economic expansion. Cyclical industries produce durable goods, raw materials, and heavy equipment.
A donor advised fund (DAF) is an investment account that an individual can establish to benefit IRS-qualified public charities. It is a separate account opened with and maintained by a 501(c)(3) “sponsoring organization” (donor advised fund provider). The individual can fund the DAF account with cash or a wide range of acceptable assets (complex assets, stocks, gold, bonds, and real estate). The fair market value of the contribution is an immediate tax deduction. Donating appreciated assets saves the individual capital gains taxes, allowing more dollars to be available for charitable donations, as well as increasing the individual’s tax savings.
Dark pools are where many institutional transactions take place. Dark pools are alternative trading systems run by large broker-dealers, offered to their best clients. Trading information from dark pools is very limitedly disclosed.
A day order is an order that is valid for that day only. If it is not executed by the close of business that day it is canceled.
A dealer is a person who deals in the buying and selling of securities as a principal, for the firm’s account.
Amount paid to the beneficiary upon the death of the insured.
A debenture is an unsecured bond. Debentures are backed only by the good faith of the corporation. Repayment of the debt is based on the company’s promise to repay.
In a long margin account the debit balance is the loan amount. Interest is charged on the debit balance.
A debit spread involves the purchase of an option and the sale of an option (buy/sell call, or buy/sell put), on the same stock, with the same expiration date. In a debit spread, more money is paid to buy the option than is collected for the sale of the option. In a debit spread, the client is hoping that the spread will widen and the options will be exercised.
Debt per capita is the total debt of a municipality divided by its population.
Debt service is the cash required in a given period, usually a year, for payment of interest and current maturities of principal on outstanding debt. In corporate bond issues, debt service is the annual interest plus annual sinking fund payments. In government bonds debt service refers to the annual payments into the debt service fund.
The debt-to-equity ratio compares a company’s long-term debt to total shareholders’ equity. The debt-to-equity ratio is a measurement of leverage.
DeFi refers to financial activities conducted without the involvement of an intermediary like a bank, government, or other financial institution.
The declaration date is the date on which the company declares an upcoming dividend, set by the board of directors.
Term life insurance with a face amount that goes down over time. Decreasing term has a level premium.
Defamation is being false or maliciously critical of an insurer’s financial condition.
When an issuer fails to pay interest or principal when due they are in default.
Defensive industries are those industries that resist market cycles. Defensive industries include alcohol, tobacco, pharmaceuticals, utilities, and the food industry.
A defensive strategy is an investment method through which investors try to minimize the risk of losing principal. One example is the policy of making purchases and sales according to predetermined objectives without regard for market changes, such as dollar cost averaging.
A deferred annuity is an annuity contract that repays principal and interest in the future. Interest earned during the accumulation (pay in) period is tax deferred. A deferred annuity is not immediately annuitized but may be annuitized in the future.
An annuity under which the annuity payment period is scheduled to begin at some future date. May be purchased with a level, flexible, or single premium.
The deferral of an employee’s compensation to some future age or date. Deferred compensation is a non-qualified plan. It is discriminatory and set up in favor of higher-paid workers. The employer does not fund a non-qualified plan. If the employer should go broke the employee will not get paid.
A deferred compensation plan is a type of non-qualified retirement plan. Generally only offered to highly paid workers, the employee defers some current compensation in favor of a payout in retirement. Deferred compensation is unfunded.
A defined benefit plan is a type of qualified plan. Defined benefit plans are covered by the Pension Benefit Guaranty Corporation (PBGC). A defined benefit plan specifies the amount of money the employee will receive at retirement.
A type of qualified retirement plan (pension plan) in which benefits are determined using a specific benefit formula.
In a defined contribution plan is a type of qualified plan. In a defined contribution plan the employer and the employee may defer a percentage of the employee’s income annually towards retirement.
A type of qualified retirement plan in which annual contributions are determined by a formula set forth in the plan.
Deflation is when there is an overall decrease in prices. Deflation is usually found during an economic contraction.
A demand deposit is a type of account held by a client at a bank or financial institution. In a demand deposit account, the client can request a full withdrawal at any time. Checking and savings accounts are demand deposit accounts.
Depreciation is used to write down (expense) over time fixed assets. Depreciation is a non-cash expense that has the effect of lowering a business’s taxable income, but not affecting their cash flow. Depreciation is found as an add-back item on a company’s statement of cash flow.