Investment Planning | VII. Technical Terminology

Stock Splits
Can be identified when the larger number is first (i.e. 2:1 split)

Reverse Split
Can be identified when the larger number is last (reverse order)

To be entitled to declared dividends you must own the stock at least one business day before the Ex-Dividend Date

Settlement of Trades

Treasury Bills
Look to see if the trade was sold by auction or in the secondary market.

  • By auction — Settlement is T + 3 business days
  • By secondary market — Settlement is T + 1 business day

Callable Status

Zero Coupon Municipal Bonds
These bonds may be callable, and will be called at the accreted value

Things To Review For Exam

  • Subscription / Warrants
  • Board of Directors Exemption
  • Calculating Current Yield
  • Options Straddle
  • Planned Amortization Class / CMO
  • Convertible Bond Quote "Parity Price"

Parity means equal value. There is a price level where the convertible bond and the common stock are worth the same value.
A pair of formulas are used to determine the Parity Price of common stock. The "Par-Conversion" ratio gets the common shares produced and the market to common ration gets the parity price.

Par Value <- This is either at a standard value of $1,000 for a bond and $100 for preferred

Par Value / Conversion Price = Common Shares Produced

Market Price of Bond or Preferred / Common Shares Produced = Parity Price

Conversion Price
Par Value / Common Shares Produced

  • Max hedge w/ options
  • Cash dividend > may not exceed earnings?
  • Currency hedge? Options?
  • Stability, safety, predictible income
  • Muni Bond > Day Count
  • Trust 1939
  • Convertible Bonds
  • Participating preferred stock
  • Out of money and commission?
  • Riskiest option?
  • Option margin dep
  • Sinking fund?
  • Background, customer verification days?
  • Spot prices?
  • Warrants / Rights?
  • Progressive redict? Bond?

Security Acts

The Uniform Securities Act

State securities laws are based on a model law called the Uniform Securities Act (USA). Associate this act with STATES-.

The Uniform Prudent Investor Act

This act was created to protect investors and their interest when involved in a trust or fiduciary relationship. The main requirement of this act is a prudent approach to investing trust assets.

The Investment Advisers Act of 1940

This act is a federal statute that is the primary regulator of all the rules over investment advisors on a federal level. Associate this act with the FEDERAL government.

The Securities Act of 1933

The Securities Exchange Act of 1934

The Investment Company Act of 1940

Not to be confused with the Investment Advisers Act of 1940, this act deals primarily with the regulation of investment companies. There are several types of investment companies, but probably the most popular type are called Mutual Fund companies.

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