Present & Future Value
Future Value
Calculations are used to determine what the value of a fixed sum of money invested today will be worth at a future date taking into consideration compounding with an expected or fixed rate of return.
Present Value
A form of discounted cash flow analysis which attempts to determine whether or not a specific investment or project will meet its expected rate of return. It involves discounting a future value back to today's price to determine whether or not the investment today will be worth returns in the future.
Bid & Ask Price
Bid Price
Price that a market maker will pay and that a customer will receive when a customer sells a security with a market order.
Ask Price
The price that a market maker receives and that a customer pays when the customer buys a security with a market order.
Discretion
Discretionary Authority for Broker/Dealers under the NASAA
A broker/dealer must obtain PRIOR WRITTEN discretionary authority from a client BEFORE exercising discretion in a client's account. Broker/dealers do NOT have a 10-day grace period where verbal authorization is adequate like IA firms.
Discretionary Authority for Investment Advisers under the NASAA
An investment adviser is permitted to exercise discretion in a client's account with written approval. The Investment Adviser also has a 10-day period during which discretionary authority is permitted on verbal authorization by a client, pending the client sending in written discretionary authority. This is only the case for IA's under the NASAA.
MISC
To whom does the trustee owe a duty?
A trustee who invests and manages trust assets owes a duty to the Beneficiaries of the trust to comply with the prudent investor rules set forth in this act and act in a fiduciary capacity.
Selling Short
A short sale is the sale of a stock by a customer who has borrowed the stock from their B/D. A short seller generally expects the market price of the stock to decline.
Performance-Based Fees
A fee based on the performance and gains of a specific investment or a portfolio that is under management. Under the USA, performance-based fees are prohibited unless permitted by rule or order by the Administrator of a State. Under the Investment Advisors Act of 1940, performance-based fees are permitted, but only when a client is considered a "Qualified Client".
Order of Claims Upon Company Liquidation
1. Taxes
2. Secured Creditors
3. Unsecured Creditors
4. Preferred Stockholders
5. Common Stockholders
The Time Value of Money
A dollar in hand today is worth more than a dollar to be received in the future due to inflation.
Over the Counter Markets (OTC)
Consists of securities that are not traded on a registered stock exchange (unlisted securities). Securities are traded from broker/dealer inventory by marketmakers. The OTC Market is considered to be a negotiated market.
Exchange Markets
An auction market where buyers and sellers represented by floor brokers meet to trade securities "listed" on the exchange or where the trades are executed through an electronic execution system. It is considered to be an auction market. The designated marketmaker, formerly known as the Specialist, oversee's trading and handles the limit order book for specific securities.
No comments:
Post a Comment