A
Accrued Interest: The interest accumulated on a bond since the last interest payment was made. The buyer of the bond pays the market price plus accrued interest. The seller of a bond receives the market price plus accrued interest. Accrued interest is measured in days and is calculated by multiplying the total annual income by the fraction of the year that has elapsed since the last payment. [Top]

Agency Securities: Securities listed by federally related institutions which were created to reduce borrowing costs for certain sectors of the economy such as homeowners and farmers. Examples of Federal agencies include: Federal Farm Credit Bank and Federal Home Loan Bank, among others. [Top]

American Stock Exchange (AMEX): Formerly the third largest stock exchange in the United States, it has now merged with the NASDAQ and is located in the financial district of New York City (former known as the Curb Exchange from its origin on a Manhattan street) [Top]

B
Basis Point: One gradation on a 100-point scale representing one percent; or one/one hundredth of 1%. Thus, 100 basis points is equal to 1%; used especially in expressing variations in the yield of bonds. Fixed income yields vary often and the basis point scale easily expresses these changes in hundredths of one percent. For example, the difference between 12.83% and 12.88% is 5 basis points. A bond's yield that increases from 6% to 6.25% is said to have risen 25 basis points. [Top]

Beta: A measurement of volatility relative to the market, usually represented by the Standard and Poors 500 Index. The S&P 500 Index is deemed to have a beta of 1.00. Accounts with a beta of more than 1.00 are more volatile than the S&P 500. Accounts with betas below 1.00 are less volatile than the S&P 500. [Top]

Bond: Any government or corporate security, which obligates the issuer to pay the bondholders a specified amount of interest, usually at specific intervals for a specified length of time and to repay the loan at maturity. In every case a bond represents debt - its holder is a creditor of the corporation and not a part owner as in the case of a shareholder. [Top]

C
Capitalization: The total financing of the firm, including the total amount of the various securities issued by a corporation. Capitalization may include bonds, debentures, preferred and common stock and surplus. Bonds and debentures are usually carried on the books of the issuing company at market value. Preferred and common shares may be carried at par or stated value. Stated value may be an arbitrary figure decided upon by the directors or may represent the amount received by the company from the sale of the securities at the time of issuance. [Top]

Cash & Equivalents: Actual cash and usually a balance of money market fund, either taxable or tax-exempt, utilizing short term high yield money market instruments such as U.S. Treasury Bills, short term US Government Notes and Bonds, and short term corporate debt, such as bankers acceptances, commercial paper and certificates of deposit. [Top]

Certificate of Participation: A single purpose lease revenue obligation not previously budgeted by the issuing entity. They must be re-approved each year on an extraordinary call provision that typically kicks in. [Top]

Common Stock: Securities which represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater reward in the form of increasing dividends and capital appreciation. Shareholders are entitled to vote on the selection of directors and other matters of business and are entitled to receive dividends, if declared. In the event of corporate liquidation the claims of all creditors, including bondholders, are senior to the claims of those who own common stock. [Top]

Consumer Price Index (CPI): Published monthly by the US Department of Labor, it measures prices of a fixed basket of goods purchased by a typical consumer, to include food, transportation, utilities, clothing, entertainment, etc. Its rates of change are widely used as a cost of living benchmark and as an indicator of inflation. [Top]

Convertible: A corporate security usually a bond or preferred share that may be exchanged by the owner for a set number of common stock shares; convertibles usually provide higher income than is available from common stock and greater appreciation potential than bonds. [Top]

Coupon: The stated interest payment on a bond. A bond with a 7% coupon will pay $70.00 per $1,000 bond annually, usually at six month intervals. [Top]

CRB: The Commodity Research Bureau constructs an equally weighted index of seventeen commodities which include industrials, grains, metals, livestock, meats and other foods. The index is viewed as a measure of commodity price trends and is commonly used as an inflation indicator. [Top]

Current Yield: A bond's annual interest income expressed as a percentage of the bond's market price. It is also a stock's annual dividend income expressed as a percentage of the stock's market price. [Top]

D
The Depository Trust & Clearing Corporation (DTCC): A central securities certificate depository through which members effect security deliveries between each other via computerized bookkeeping entries thereby reducing the physical movement of stock certificates. [Top]

Dividend: The distribution of earnings to shareholders, as designated by the Board of Directors, divided pro rata by class of security among the shares outstanding. On preferred shares, it is generally a fixed amount of cash. On common shares, the dividend varies with the fortunes of the company and the amount of cash on hand, and may be omitted if business is poor or the directors determine to withhold earnings to invest in plant and equipment. Sometimes a company will pay a dividend out of past earnings even if it is not currently operating at a profit. A corporation may also occasionally pay a dividend in the form of stock, either its own or that of a subsidiary or related company. [Top]

The Dow Jones Industrial Average: A price weighted average of 30 widely held and actively traded stocks, which is the oldest and most widely quoted of all market indexes. The value of the Dow Jones is determined by dividing the sum of the per share prices of the 30 stocks in the index by a denominator adjusted to accommodate splits and changes in stock composition. [Top]

Duration: The price sensitivity of bonds to changes in interest rates. As a practical matter, it is a volatility measure. Duration is the percentage change in price that would occur given a 100 basis point change in yield. A duration of 4, for example, means that the price of the bond will change 4% for a 100 basis point change in yield. [Top]

E
Equity: The ownership interest of common and preferred shareholders in a company. Also refers to excess of value of securities over the debit balance in a margin account. [Top]

F
Face Value: The value of a bond or note that appears on its face, unless the value is otherwise specified by the issuing company. Face value is ordinarily the amount the issuing company promises to pay at maturity. Face value is not an indication of market value. Sometimes referred to as par value. [Top]

Fixed Income: A security that pays a fixed rate of return. The term usually refers to a government, corporate or municipal bond, which pays bondholders a specified amount of interest for a specified length of time, and to repay the loan at the expiration date. It may also refer to preferred stock, when such preferred pays a fixed dividend. [Top]

G
Government Bonds: Obligations of the US Government, regarded as the highest grade securities issues. [Top]

I
Indenture: A formal written agreement under which bonds and debentures are issued, setting forth the form of the bond, the amount of the issue, maturity date, interest rate, protective covenants, if any, redemption rights and call privileges, among other things. [Top]

L
Lehman Government/Corporate Bond Index: Composed of US Treasury, federal agency and investment grade corporate debt rated Baa or better, with at least one year to maturity and at least $25 million par outstanding. The index is weighted by the market value of the issues included in the index and is representative of approximately 100% of all investment grade bonds, not including mortgage backed securities. [Top]

Lehman Intermediate Government/Corporate Bond Index: Composed of approximately 3,585 publicly issued corporate and US Government debt rated Baa or better, with at least one year to maturity and a maximum of ten years maturity, and at least $25 million par outstanding. The index is weighted by the market value of the issues included in the index and is representative of approximately 62% of all investment grade bonds. [Top]

M
Maturity: The date on which a loan or bond comes due and is to be paid off. [Top]

Money Market Fund: An open-ended mutual fund whose investments are in money market instruments such as short term federal securities, certificates of deposit, bankers acceptances and commercial paper. Its intent is to make such instruments, normally purchased only in large denominations by institutions, available indirectly to individuals and smaller institutions by making units of such funds available. [Top]

Municipal Bond: A debt obligation issued by a state or a political subdivision, such as county, city, town or village. The term also designates bonds issued by state agencies and authorities. In general, interest paid on municipal bonds is exempt from federal income taxes and the state and local income taxes within the state of issue. [Top]

N
National Association of Securities Dealers' Automated Quotation System (NASDAQ): An electronic stock market listing network that provides its 550 market making brokers and dealers with price quotations on nearly 6,000 securities traded over the counter. [Top]

Net Asset Value: Usually used in connection with mutual funds to mean the market value of a fund share. Mutual funds compute the value of their assets daily by totaling the market value of all securities owned. Liabilities are deducted and the balance is divided by the number of shares outstanding. The resulting figure is net asset value per share. [Top]

New York Stock Exchange (NYSE): The largest organized securities market in the United States, founded in 1792 and currently comprising about half the total dollar volume of shares traded in the United States. The Exchange itself does not buy, sell, own or set the prices of securities traded there. The prices of each of its 3,000 listed companies are determined by public supply and demand. The Exchange is an unincorporated association of 1,366 individual members, governed by a Board of Directors consisting of ten public representatives, ten Exchange members of allied members and a full time chairman, executive vice chairman and president. [Top]

NYSE Composite Index: A capitalization-weighted index of all stocks listed on the New York Stock Exchange. The value of the index varies with the aggregate value of the common equity of all companies with common stock listed on the NYSE. [Top]

P
Pre-refunded Bond: A bond issuer floats a second bond so that it can pay off a first bond at the first call date. The proceeds of the second bond are invested in safe US Government securities maturing at the first call date of the first bond. The first bonds are now said to be pre-refunded once this process has taken place. [Top]

Price-Earnings (P/E) Ratio: The P/E ratio is the price of a share of stock divided by the company's earnings per share for a twelve month period. For example, a stock selling for $50 a share with earnings of $5 a share is said to be selling at a price earnings ratio of 10. [Top]

Prime Rate: The base interest rate charged by commercial banks to their most creditworthy and best corporate customers; other interest rates, such as personal, automobile, commercial and financing loans often key off the prime rate. [Top]

R
Russell 1000 Index: An index which represents 1000 of the largest US public companies as measured by market capitalization. The Russell 1000 has an average market capitalization of $7.6 billion. [Top]

S
Split: The division of the outstanding shares of a corporation into a different number of shares. A 3 for 1 split by a company with 1 million shares outstanding results in 3 million shares outstanding. Each holder of 100 shares before the 3 for 1 split would have 300 shares. Note, however, that the shareholder's proportionate equity in the company would remain the same as all other shareholders would receive 3 shares for every 1 they held as well. Splits can operate in reverse as well. For example, a 1 for 10 reverse split would result in a shareholder's having 10 shares for each 100 held. Ordinarily, splits must be voted by directors and approved by shareholders. [Top]

Standard & Poor's 500 Stock Composite Index: A market capitalization weighted index of 500 publicly traded stocks. The value of the index varies with the aggregate value of the common equity of each of the 500 companies. [Top]

Standard & Poor's MidCap 400 Stock Composite Index: A market capitalization weighted index of 400 medium capitalization publicly traded common stocks. The value of the index varies with the aggregate value of the common equity of each of the 40 companies. [Top]

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

T
T-Bills: A US government guaranteed money market security with maturities not to exceed one year. [Top]

Taxable Equivalent: The pre-tax yield that a taxable bond would have to pay to equal a given tax free yield, given an investor's tax bracket. [Top]

V
Value Line Composite Average: The equally weighted geometric average of the percent changes of the approximately 1,700 stocks included in the index. The companies whose stocks are included are both NYSE and NASDAQ listed and represent an excellent cross section of the US economy. [Top]

Y
Years to Maturity: Time in which bonds will be outstanding unless subjected to earlier call or other redemption. [Top]

Yield: The dividends or interest paid by a company expressed as a percentage of the current price. A stock with a current market value of $40 a share paying dividends at the rate of $3.20 is said to yield 8% ($3.20/$40.00). The current yield on a bond is figured the same way. [Top]

Yield to Maturity (YTM): The yield of a bond to maturity 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. [Top]