Financial Glossary

    Financial Glossary

    Financial Glossary

    1-9 | A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

     

     


     


    1-9

    401(k)
    A type of profit sharing plan offered by a corporation to its employees, which allows employees to set aside tax-deferred income for retirement purposes. In some cases employers will match their contribution dollar-for-dollar.

    403(b)
    A tax-advantaged retirement plan, similar to a 401(k) plan, but one that is available for public education organizations and some non-profit employers, rather than corporations. It has tax treatment similar to a 401(k) plan.

    457
    A tax-exempt deferred compensation program made available to employees of state and federal governments and agencies. A 457 plan is similar to a 401(k) plan, except there are never employer matching contributions and it is not considered a qualified retirement plan by the IRS.

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    A

    Accrued Interest
    The interest due on a bond or other fixed income security since the last interest payment was made. The buyer of a bond pays the market price plus accrued interest.

    American Depositary Receipt (ADR)
    A receipt issued by a U.S. Depository Bank that represents shares of a foreign corporation held by the bank. Because ADRs are quoted in U.S. dollars and trade just like any other stock, they make it simple for investors to diversify their holdings internationally.

    American Stock Exchange (AMEX)
    An open auction market similar to the NYSE, where buyers and sellers compete in a centralized marketplace. The AMEX typically lists small- to medium-cap stocks of younger or smaller companies. Until 1921, it was known as the New York Cumulative Exchange.

    Asset
    Property and items of value owned by a person or business. The primary classifications of assets are:

    • Current assets—cash and other liquid instruments, including accounts receivable, that can be converted to cash within one year maximum
    • Long-term assets—plants, equipment, real estate, and other capital assets; net of depreciation
    • Prepaid and deferred assets—expenditures for future costs or expenses, such as insurance, interest, or rent, that are set up as assets to be amortized over an applicable period
    • Intangible assets—assets with a determined value but that may not be scalable, such as goodwill, patents, copyrights, and brand-name recognition

     

    Asset Class
    A type of investment, such as stocks, bonds, real estate, or cash.

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    B

    Base Point
    One one-hundredth of one percent. Such a small measurement is especially helpful in expressing the often small but significant variations in bond yields. For example, the difference between a 12.83-percent yield and a 12.88-percent yield is five basis points.

    Bear Market
    A term to describe a market of declining prices.

    Bear (Bull)
    For generations, bulls and bears on Wall Street have referred to two decidedly different types of investors—the bulls being those who expect stock prices to rise, the bears being those who believe prices are about to decline.

    Bearer Bond
    A bond that does not have the owner's name registered on the issuer's books. Interest and principal, when due, are payable to the owner.

    Beta
    Coefficient measuring a stock's relative volatility. The beta is a covariance of the stock in relation to the rest of the stock market. The Standard & Poor's 500 Stock Index has a beta coefficient of 1. Any stock with a higher beta is more volatile than the market, and any stock with a lower beta can be expected to rise and fall more slowly than the market. A conservative investor whose main concern is preservation of capital should focus on stocks with low betas, whereas one willing to take high risks in an effort to earn high rewards should look for high-beta stocks.

    Bid and Ask
    Collectively called the quote, the bid refers to the highest price a buyer is willing to pay for a stock, while the ask is the lowest price a seller will accept.

    Blue Chip
    A company known nationally for the quality of its products or services, its reliability, and its ability to operate profitably in good and bad economic times.

    Blue Sky Laws
    A popular name for various state laws enacted to protect the public against securities fraud. The term is believed to have originated when a judge ruled that a particular stock had about the same value as a patch of blue sky.

    Bond
    Bonds are promissory notes or IOUs issued by a corporation or government to its lenders. They are usually issued in multiples of $1,000 or $5,000, although $100 and $500 denominations are available.

    A bond is evidence of a debt on which the issuing company usually promises to pay the bondholder a specified amount of interest at intervals over a specified length of time and to repay the original loan on the expiration date. A bond represents debt; therefore, its holder is a creditor of the corporation and not a part owner, as the stockholder is.

    The NYSE operates both a bond trading floor and an Automated Bond System (ABS), where listed bonds may be traded.

    Book Value
    An accounting term. A stock's book value is determined by adding up all of a company's assets and then deducting all of its debt and liabilities, including the liquidation price of any preferred issues. This sum is then divided by the number of common shares outstanding, and the result is book value per common share.

    Book value of a company's assets or of a security may have little relationship to the market value.

    Broker
    An agent who acts as an intermediary between buyer and seller in trading securities, commodities, or other property. He or she charges a commission for this service.

    Buy
    To obtain ownership of a security or other asset in exchange for money or value.

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    C

    Capital Gain
    Profit earned on the sale of securities, either through dividends or by selling the securities at a higher price than they originally cost.

    Capital Stock
    All shares representing ownership of a business, including common and preferred.

    Cash Flow
    Reported net income of a corporation plus amounts charged for depreciation, depletion, amortization, and extraordinary charges to reserves, which are bookkeeping deductions and not paid out in actual dollars and cents.

    Cash In Lieu
    Receive cash in lieu of fractional shares.

    Cash Sale
    A transaction on the floor of the stock exchange that calls for delivery of the securities the same day. In regular stock trades, the seller is to deliver on the third business day. Bonds must be delivered on the day after a trade.

    Certificate of Deposit
    An agreement with a bank that you will leave your money on deposit for a specified period of time in return for a specific amount of interest.

    Commission
    The broker's basic fee for purchasing or selling securities as an agent.

    Common Stock
    Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred stockholders have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.

    Corporate Bond
    A bond issued by a corporation.

    Cumulative Preferred
    A stock having a provision that if one or more dividends are omitted, the omitted dividends must be paid before dividends may be paid on the company's common stock.

    Current Assets
    Company assets that are reasonably expected to be realized in cash, sold, or consumed during one year. These include cash, U.S. government bonds, receivables, money due usually within one year, and inventories.

    Current Liabilities
    Money owed and payable by a company, usually within one year.

    CUSIP
    A system trademark that uniquely identifies securities trading in the U.S. It was developed in the late 1960s by the American Bankers Association as a way to standardize the identification and tracking of securities. The CUSIP number consists of nine digits—the first six identify the issuer, and seven through nine identify the issue. Please note that CUSIP numbers are a trademark of the American Bankers Association and, as such, cannot be posted on our website.

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    D

    Debit Balance
    In a customer's margin account, that portion of the purchase price of stock, bonds, or commodities that is covered by credit extended by the broker to the margin customer.

    Deliver In/Out
    Deliver a position or cash into or out of a portfolio.

    Discretionary Account
    An account in which the customer gives the broker or someone else discretion to buy and sell securities or commodities, including selection, timing, amount, and price to be paid or received.

    Dividends
    A dividend is the payment designated by the board of directors to be distributed pro rata among the shares outstanding. For preferred shares, the dividend is usually a fixed amount. For common shares, the dividend varies with the company's fortunes and the amount of cash on hand and may be omitted if business is poor or if the directors determine to withhold earnings to invest in plants and equipment. Sometimes a company will pay a dividend out of past earnings, even if it is not currently operating at a profit. A dividend can either be paid in cash or reinvested into the security.

    Dollar-Cost Averaging
    A system of buying securities at regular intervals with a fixed dollar amount. Under this system, investors buy by the dollar's worth rather than by the number of shares. If each investment is of the same number of dollars, payments buy more shares when the price is low and fewer when it rises. Temporary downswings in price benefit investors if they continue periodic purchases in both good times and bad, and the price at which the shares are sold is more than their average cost.

    Dow Jones Industrial Average (DJIA)
    The DJIA is an index used to measure the U.S. financial markets' performance. Introduced on May 26, 1896, by Charles H. Dow, the DJIA is the oldest stock price measure in continuous use. Over the past century, it has become the most widely recognized stock market indication in the U.S., and probably in the world.

    For more information about DJIA, visit the Dow Jones website, www.dowjones.com

    Depository Trust Company (DTC)
    DTC provides a central securities certificate depository through which brokers deliver securities by computerized bookkeeping entries, vastly reducing physical transfer of stock certificates. DTC is operated by separate management and has an independent board of directors.

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    E

    Equity
    Ownership in a company. Whereas bonds represent debt, stocks represent equity.

    Ex-Dividend
    A synonym for without dividend. The buyer of an ex-dividend stock is not entitled to the next dividend payment. Dividends are paid on a set date to all those shareholders recorded on the company's books as of a previous date of record.

    For example, a dividend may be declared as payable to stockholders of record on a given Friday. Since three business days are allowed for delivery of stock in a regular transaction on the NYSE, the exchange would declare the stock “ex-dividend” as of the market's opening the following Wednesday. That means anyone who bought it on or after that Wednesday would not be entitled to that dividend. When stocks go ex-dividend, the stock tables include the symbol x following the name.

    Exercise
    Action taken by an option holder that requires the writer to perform the contract's terms.

    Exercise Price
    The price at which an option may be exercised. Also called the strike price.

    Exercise Settlement Amount
    The difference between the option's exercise price and the index's exercise settlement value on the day an exercise notice is tendered, multiplied by the index multiplier.



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    F

    Financial Industry Regulatory Authority (FINRA)
    FINRA is the largest nongovernmental regulator for all securities firms doing business in the U.S. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

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    G

    Growth Stock
    Shares of a company known for a history of rapid earnings growth. Most growth stocks do not pay dividends because management reinvests the earnings to feed the growth.

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    I

    Income Bond
    Bonds that promise to repay principal but to pay interest only when it is earned. In some cases, the unpaid interest on an income bond may accumulate as a claim against the corporation when the bond becomes due.

    Income Stock
    Common stocks that pay large dividends that an investor could use as income.

    Independent Broker
    Member on the floor of the NYSE who executes orders for other brokers who are too busy to handle all of their orders or for firms who do not have their exchange member on the floor. Independents are still sometimes referred to as “two-dollar brokers” because they originally received $2 for every hundred shares they traded. Now the commission brokers pay their fees.

    Index
    Any comprehensive measure of market trends, intended for investors concerned with general stock market price movements.

    Individual Retirement Account (IRA)
    A retirement account that allows an individual to set aside money each year, in which earnings grow tax-deferred until withdrawals may begin at age 59 1/2 or later (or potentially earlier, with penalties incurred).

    Industry Group
    A classification of securities by industry.

    Interest Rate
    Another important economic indicator. The price, calculated as a percentage of the money loaned, that banks are charging borrowers for the use of the banks' money.

    Interest
    The cost of borrowing money. Because bonds represent a loan to a company, they receive interest, while stocks represent ownership and so only receive a share of earnings.

    Internal Rate of Return (IRR)
    The rate of return that would make the present value of future cash flows plus the final market value of an investment or business opportunity equal the current market price of the investment or opportunity. Also called dollar-weighted rate of return.

    Investment Portfolio
    A variety of securities owned by an individual or institution.

    Investment
    The use of money for the purpose of making more money, to gain income or increase capital, or both.

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    K

    Keogh Plan
    Tax-advantaged, personal retirement program that a self-employed individual can establish.

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    L

    Liabilities
    All claims against a corporation's assets. Liabilities can include accounts, wages, and salaries payable; dividends declared; taxes accrued; and fixed or long-term debt, such as bonds and bank loans.

    Liquidity
    (1) How easily one's assets can be converted back into cash. For example, money in an account that can't be withdrawn for 10 years is not very liquid. (2) The ability of the market in a particular security to absorb a reasonable amount of buying or selling at reasonable price changes. Liquidity is one of the most important characteristics of a good market.

    Listed Stock
    A company stock that is traded on a securities exchange. The various stock exchanges have different standards for listing. Some of the guides used by the NYSE for an original listing include national interest in the company and a minimum of 1.1 million shares publicly held among not fewer than 2,000 round-lot stockholders.

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    M

    Margin Call
    A demand upon a customer to put up money or securities with the broker. The call is made when a purchase is made or if a customer's equity in a margin account declines below a minimum standard set by the exchange or by the firm.

    Margin
    The amount paid by the customer when using a broker's credit to buy or sell a security. Under Federal Reserve regulations, the initial margin required since 1934 has ranged from 40 percent up to 100 percent of the purchase price. Since 1974, the current rate of 50 percent has been in effect.

    Market Order
    An order to buy or sell at the best price currently available on the trading floor.

    Market Price
    The last reported price at which the stock or bond sold, or the current quote.

    Market Value
    A security's current resale value. An issue's market value is easily computed as the closing price multiplied by the shares outstanding.

    Maturity Date
    The date that a bond comes due and must be paid off.

    Money Market Account
    An account in which the bank or investment firm managing the account reinvests your money in short-term securities.

    Mortgage Bond
    A bond secured by a mortgage on a property. The value of the property may or may not equal the value of the bond issued against it.

    Municipal Bond
    A bond issued by a county, city, district, or authority.

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    N

    National Association of Securities Dealers Automated Quotation System (Nasdaq)
    Nasdaq is a global intranet providing brokers and dealers with price quotations on traded, over-the-counter securities. Unlike the NYSE auction market where orders meet on a trading floor, Nasdaq orders are paired and executed on a computer network. Level I service provides the best bid and offer (BBO) in a given security without identifying the market maker. Level II service provides the BBO and identifies the market maker. Level III service allows registered market makers to compete and trade by entering their own bids and offers.

    Net Change
    The change in a security's price from the closing price on one day to the closing price on the next day the stock is traded.

    New York Stock Exchange (NYSE)
    The NYSE marketplace blends public pricing with assigned dealer responsibilities. Aided by advanced technology, public orders meet and interact on the trading floor with a minimum of dealer interference. The result is competitive price discovery at the point of sale. Individual and institutional investors, member firms trading for their own accounts, and assigned specialists provide liquidity in the NYSE auction market system. The NYSE is linked with other markets trading listed securities through the Intermarket Trading System (ITS).

    NYSE-assigned dealers, known as specialists, are responsible for maintaining a fair and orderly market in the securities assigned to them. Most trading, however, is conducted by brokers acting on behalf of customers, rather than by dealers trading for their own accounts. For this reason, the NYSE is often described as an agency auction market. The interaction of natural buyers and sellers determines the price of an NYSE-listed stock.

    NYSE-Listed
    Companies that have applied and been approved to have their shares traded on the NYSE.

    NYSE Composite Index
    In 1966, the NYSE established the NYSE Composite Index to provide a comprehensive measure of the market trend for the benefit of many investors who are concerned with general stock market price movements. The indices consist of a Composite Index of all common stocks listed on the NYSE and four subgroup indices—Industrial, Transportation, Utility, and Finance.

    The indices are basically a measure of the changes in the aggregate market value of NYSE common stocks, adjusted to eliminate the effects of capitalization changes, new listings, and delistings. The market value of each stock is obtained by multiplying its price per share by the number of shares listed. The aggregate market value, which is the sum of the individual market values, is then expressed relative to a base-point market value. The base value was set at 50 on December 31, 1965, because this figure was reasonably close to the actual average price of all common stocks at that time.

    The arithmetic procedure in calculating the index is shown in the following simplified example: year-end total market value of common stocks, $5,943.5 billion, divided by adjusted base market value, $901.9 billion, multiplied by 50 equals the index, 329.51 at year-end.

    Every measure of changes in stock prices—index or average—must frequently be adjusted to reflect only movements resulting from auction market activity and to eliminate the influence of corporate actions. This index deals with any change in the capitalization of an individual issue or of all issues in aggregate by making a proportionate change in the base figure's market value.

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    P

    Paydown
    Pay down principal on asset-backed securities, reducing the current face value and cost basis.

    Penny Stocks
    Low-priced issues, often highly speculative, selling at less than $1 a share. Frequently used as a term of disparagement, although some penny stocks have developed into investment-caliber issues.

    Point
    In the case of stock shares, a point equals $1. If ABC shares rise 3 points, each share has risen $3 in price. In the case of bonds, a point equals $10 because bonds are quoted as a percentage of $1,000. An advance from 87 to 90 would mean a rise in value of $30 from $870 to $900.

    Portfolio
    The collection of investment instruments owned by one individual or institution. A portfolio can consist of any combination of stocks, bonds, derivatives, and such.

    Preferred Stock
    A type of stock that pays a fixed dividend, regardless of corporate earnings, and that has priority over common stock in the payment of dividends. It carries no voting rights, however, and should earnings rise significantly, the preferred holder is stuck with the same fixed dividend while common holders collect more. The fixed income stream of preferred stock makes it similar in many ways to bonds.

    Prospectus
    The official document that, according to SEC regulations, the issuer must provide to potential purchasers of a new securities issue. It highlights the much longer registration statement filed with the SEC that gives information on the financial well-being of the issuer and the specifics of the issue itself. Potential investors can consult this information before buying.

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    Q

    Quote
    The highest bid to buy and the lowest offer to sell any stock at a given time.

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    R

    Rate of Return
    In stocks and bonds, the amount of money returned to investors on their investments. Also known as yield.

    Real Estate Investment Trust (REIT)
    An organization similar to an investment company in some respects but concentrating its holdings in real estate investments. The yield is generally liberal since REITs are required to distribute as much as 90 percent of their income.

    Record Date
    The date on which you must be registered as a company shareholder so that you can receive a declared dividend or, among other things, vote on company affairs.

    Redemption Price
    The price at which a bond may be redeemed before maturity, at the option of the issuing company. Redemption value also applies to the price the company must pay to call in certain types of preferred stock.

    Registered Bond
    A bond that is registered on the books of the issuing company in the owner's name. It can be transferred only when the registered owner endorses it.

    Registered Representative
    The person, normally employed by a brokerage firm or broker/dealer, who acts as an account executive for customers by buying and selling securities. The term registered means the individual has passed qualifying securities examinations and is registered with FINRA.

    Regulation T
    The federal regulation governing the amount of credit that brokers and dealers may advance to customers for the purchase of securities.

    Regulation U
    The federal regulation governing the amount of credit that a bank may advance to its customers for the purchase of listed stock.

    Reinvest
    Funneling of profits back into a company to enhance its operations. An individual stockowner can also reinvest by designating that dividends paid on stock be used to purchase additional shares of that stock.

    Return of Capital
    A distribution of cash resulting from depreciation tax savings, the sale of a capital asset or securities, or any other transaction unrelated to retained earnings.

    Rights
    When a company wants to raise more funds by issuing additional securities, it may give its stockholders the opportunity, ahead of others, to buy new securities in proportion to the number of shares each owns. The piece of paper evidencing this privilege is called a right. Because the additional stock is usually offered to stockholders below the current market price, rights ordinarily have a market value of their own and are actively traded. In most cases, they must be exercised within a relatively short period. Failure to exercise or sell rights may result in monetary loss to the holder.

    Roth IRA
    A type of IRA that allows an individual, subject to certain income limits, to save for retirement while allowing the earnings to grow tax-free. Taxes are paid on contributions, but qualified withdrawals may be made tax-free.

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    S

    Sector
    A distinct subset of a market, society, industry, or economy, whose components share similar characteristics.

    Security
    An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization that offers evidence of debt or equity. The official definition, from the Securities Exchange Act of 1934, is, "Any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease; any collateral trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit; for a security; any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities (including any interest therein or based on the value thereof); or any put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, any instrument commonly known as a ‘security'; or any certificate of interest or participation in, temporary or interim certificate for, receipt for, or warrant or right to subscribe to or purchase any of the foregoing; but shall not include currency or any note, bill of exchange, or banker's acceptance, which has a maturity at the time of issuance of not exceeding nine months, exclusive of days of grace, or any renewal thereof, the maturity of which is likewise limited."

    Sell
    To transfer ownership of a security or other asset in exchange for money or value.

    Short Position
    Stock options or futures contracts sold short and not covered as of a particular date. On the NYSE, a tabulation is issued once a month listing all issues on the exchange in which there was a short position of 5,000 or more shares or in which the short position had changed by 2,000 or more shares in the preceding month. Short position also means the total amount of stock an individual has sold short and has not covered as of a particular date.

    Short Sale
    A transaction by a person who believes a security will decline and sells it, though the person does not own the security. For instance, you instruct your broker to sell 100 shares of XYZ. Your broker borrows the stock so delivery of the 100 shares can be made to the buyer. The money value of the shares borrowed is deposited by your broker with the lender. Sooner or later, you must cover your short sale by buying the same amount of stock you borrowed for return to the lender.

    If you are able to buy XYZ at a lower price than you sold it for, your profit is the difference between the two prices—not counting commission and taxes. But if you have to pay more for the stock than the price you received, that is the amount of your loss. Stock exchange and federal regulations govern and limit the conditions under which a short sale may be made on a national securities exchange. Sometimes, people will sell short a stock they already own in order to protect a paper profit. This is known as selling short against the box.

    SIMPLE
    A type of tax-advantaged employer-provided retirement plan that certain small business employers can establish for the benefit of their employees. A SIMPLE may be established as an IRA-based plan, or as part of a 401(k) plan.

    Spinoff
    The separation of a subsidiary or division of a corporation from its parent by issuing shares in a new corporate entity. Parent shareowners receive shares in the new company in proportion to their original holding, and the total value remains approximately the same.

    Split
    The division of the outstanding shares of a corporation into either a larger or smaller number of shares, without any immediate impact in individual shareholder equity. For example, a 3-for-1 forward split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the split would have 300 shares worth less, although the proportionate equity in the company would stay the same. A reverse split would reduce the number of shares outstanding, and each share would be worth more.

    Stock Dividend
    A dividend paid in securities rather than cash. The dividend may be additional shares of the issuing company or shares of another company (usually a subsidiary) held by issuing the company.

    Stock Split
    When a company increases the number of shares outstanding by splitting existing shares. A 2-for-1 split means every stockholder gets two new shares for each one he or she owns, and a 3-for-2 split means each stockholder gets three shares for every two he or she owns. The price of an individual share falls, but stockholders do not lose money because they are being given the equivalent number of new shares.

    In a reverse stock split, a company reduces the number of the shares outstanding by consolidating existing shares. A 1-for-5 reverse split, for example, means for each five shares owned, the stockholder receives a single new share instead. The new share's price is five times higher but only to reflect the shortened supply. If a company's stock is trading at a very low price, this process makes the company look more attractive to investors.

    S&P 500
    A capitalization-weighted index of 500 stocks. Standard & Poor's 500 Index represents the price-trend movements of the major common stock of U.S. public companies.

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    T

    Tender Offer
    A public offer to buy shares from stockholders of a company, usually made by another company attempting an acquisition. So called because stockholders are asked to tender (surrender) their holdings for a premium above the current market price.

    Ticker Symbol
    A three- or four-letter abbreviation used to identify a security, whether on the floor, a TV screen, or a newspaper page. Ticker symbols are part of the lore of Wall Street. They were originally developed in the 1800s by telegraph operators to save bandwidth. One-letter symbols were therefore assigned to the most active stocks. Railroads were the dominant issues at the time, so they retain a majority of the one-letter designations.

    Ticker symbols today are assigned on a first-come, first-served basis. Each marketplace—the NYSE, the AMEX, and others—allocates symbols for companies within its purview, working closely to avoid duplication. A symbol used for one company cannot be used for any other, even in a different marketplace.

    Trader
    An employee of a broker/dealer or other financial institution who specializes in handling purchases and sales of securities for the firm or its clients.

    Transfer Agent
    A transfer agent keeps a record of the name of each registered shareowner, his or her address, and the number of shares owned. The transfer agent also sees that the certificates presented for transfer are properly canceled and new certificates issued in the new owner's name.

    Transfer
    The legal change in ownership after a security sale. This task may involve the physical delivery of a stock certificate or the change of ownership on the books of the corporation by the transfer agent.

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    W

    Wilshire 5000
    A capitalization-weighted index of all U.S.-headquartered companies. The portfolio's capitalization is the sum of the market capitalizations of all the companies.

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    Y

    Yield to Maturity (YTM)
    A bond's YTM takes into account the price discount from or premium over the face amount. It is greater than the current yield when the bond is selling at a discount and less than the current yield when the bond is selling at a premium.

    Yield
    In stocks and bonds, the amount of money returned to investors on their investments. Also known as rate of return.

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    Z

    Zero Coupon Bond
    A bond that pays no interest but is priced, at issue, at a discount from its redemption price.

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