Securities Products and Markets Flashcards

Which type of security represents ownership in a corporation and entitles the holder to a share of profits through dividends?

Answer: Common stock

Common stock represents equity ownership in a corporation and may pay dividends declared by the board of directors.

A municipal bond issued to finance a specific revenue-generating project and repaid solely from that project's revenues is called a:

Answer: Revenue bond

Revenue bonds are backed only by income generated from the specific project they finance, such as a toll road or utility, not by the issuer's taxing power.

Which market is characterized by investors trading securities among themselves rather than with the issuing company?

Answer: Secondary market

The secondary market is where previously issued securities are bought and sold between investors, with no proceeds going to the issuing company.

A bond that can be redeemed by the issuer before its stated maturity date is known as a:

Answer: Callable bond

A callable bond gives the issuer the right to redeem the bond prior to maturity, typically when interest rates decline.

What does the term 'market capitalization' of a publicly traded company represent?

Answer: Total value of all outstanding shares

Market capitalization equals the current share price multiplied by the total number of outstanding shares, representing the market's total valuation of the company.

Which of the following is a money market instrument with a typical maturity of less than one year?

Answer: Treasury bill

Treasury bills are short-term U.S. government debt securities issued with maturities of 4, 8, 13, 26, or 52 weeks, making them classic money market instruments.

An American Depositary Receipt (ADR) allows U.S. investors to purchase shares of:

Answer: Foreign company stocks traded on U.S. exchanges

ADRs are certificates issued by U.S. banks representing shares of foreign companies, allowing U.S. investors to buy foreign equities on domestic exchanges in U.S. dollars.