KENTUCKY CROSSWORDS

Consumer Investments

Investment Glossary page 1

AMEX (American Stock Exchange): The third largest stock exchange in the US, behind the New York Stock Exchange (NYSE) and NASDAQ.

Ask: Refers to the price at which someone is currently willing to sell a stock, in other words the price they are asking for. See also: Bid, Spread.

Bid: Refers to the price at which someone is currently willing to buy a stock. In other words, they are bidding for stock at that price. See: Ask, Spread.

Brokers: Financial agents who match buyers and sellers of stock but do not take ownership of securities and hold an inventory of the they broker as dealers do. See Dealers.

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Call option: An option contract that provides the right to buy a security at a specified price on or before a particular date. See Put option.

Capital market: A financial market in which longer term debt and equity instruments are traded; the stock market in the US is an example of an capital market.

Capital yield: The increase in value a shareholder acquires due to the increase in the price of stock.

Close: The price of a particular stock at the final market transaction of the day.

Commodities: Goods, especially unprocessed material, for which there is a consistent demand, regardless of economic conditions, and which can be supplied without visible differences in quality. Commodities are said to be fungible, meaning the same no matter who produces them. Some examples of commodities are copper, corn, milk, petroleum, wheat and et cetera.

Confirm: Short for confirmation; a receipt for a trade.

Coupon interest rate: Often referred to simply as the coupon rate, this term is used to refer to the annual interest rate on a bond. The coupon rate is expressed as a percentage of the face value and is usually fixed for the life of the bond.

Covenants: Restrictions on the actions of management in a bond indenture.

Current yield: Expressed as a percentage, the coupon interest payment that the investor receives annually on a bond, divided by the bond's current market price.

Day order: An order to buy or sell securities that specifies if the set price is not met by the time the market closes for the day, the order is to be cancelled.

Dealer: A company or individual who takes ownership of securities, when necessary and resells them to provide faster liquidity in the markets by allowing investors to sell immediately instead of waiting for a matched buyer. See Brokers.

Debt service: In the bond market when a company pays interest on its outstanding bonds it is known as servicing its debts.

Direct stock purchase plan (DSPP): Investment plans offered by some companies that give investors the option to purchase their stock directly from the company (through a transfer agent) without going through a brokerage firm. See also Dividend reinvestment plan.

Diversification: A commonly used investment strategy in which investors hold a variety of securities in order to minimize risk. See "The Importance of Diversification".

Dividend: Stockholders share of a company's profits, usually distributed via periodic payments to shareholders.

Disclaimer: Information on this Web site is intended for consumer informational purposes only.