Financial markets
transfer funs from savers to borrowers
Depository Institutions
financial intermediary that obtains funds by accepting checking or savings deposits (or both) and uses these funds to make loans to borrowers
Commercial Banks
most common depository institution
Credit Unions
depository institution that is organized as a cooperative (not for profit organizations) that are owned by depositors
Savings and Loans Associations (S&Ls or thrifts)
depository institution that has traditionally obtained most of its funds by accepting savings deposits, which have been used primarily to make mortgage loans
Institutional Investors
major holders of corporate bonds and government securities; gather use pools of financial capital from other sources and use these funds to acquire a portfolio of many different assets
Securities Brokers
financial intermediary that acts as a agent for investors who want to buy and sell financial securities
Securities Dealers
financial intermediary that participates directly in securities markets, buying and selling stocks and other securities in its own account
Investment Bankers
financial intermediary that specializes in helping firms raise financial capital by issuing securities in primary markets
Federal Reserve Act of 1913
law that established the Federal Reserve System as the central bank of the US
Banking Act of 1933 (Glass- Steagall Act)
law that established the Federal Deposit Insurance Corporation (FDIC) to insure bank deposits. It also prohibited commercial banks from selling insurance or acting as investment banks
Securities Act of 1933
first major federal law regulating the securities industry. It requires firms issuing new stock in a public offering to file a registration statement with the SEC
Securities and Exchange Act of 1934
A federal law dealing with securities regulation that established the SEC to regulate and oversee the securities industry
Securities and Exchange Commission
Federal agency with primary responsibility for regulating the securities industry
Financial Services Modernization Act of 1999 (Gramm-Bliley-Leach Act)
act that overturned the section of the Banking Act of 1933 that prohibited commercial banks from selling insurance or performing the functions of investment banks
Commons stock
basic form of ownership in corporation
Preferred Stock
gives its holder preference over common stockholders in terms of dividends and claims on assets
Bond
formal debt instrument (IOS) issued by a corporations or government entity
Par Value of bond
value of bond at maturity
Coupon Rate
interest paid on a bond, expressed as a percentage of the bond's par value
Current yield
amount of interest earned on a bond, expressed as a percentage of the bond's current market price
convertible securities
bond or share of preferred stock that gives it holder the right to exchange it for a stated number of shares of common stock
conversion ratio
indicates the number of shares of common stock exchanged for each convertible security
Mutual Funds
institutional investor that raises funds by selling shares to investors and uses the accumulated funds to buy a portfolio of many different securities
Net Asset Value Per Share
value of a mutual fund's securities and cash holdings minus any liabilities, divided by the number of shares of the fund outstanding
Exchange Traded Fund (ETF)
shares traded on securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities
Primary Securities Market
market where newly issued securities are traded
Public offering
primary market issue in which new securities are offered to any investors who are willing and able to purchase them
Private placement
primary market issue that is negotiated between the issuing corporation and a small group of accredited investors
Secondary Securities Market
market where previously issued securities are traded
underwriting
arrangement under which an investor banker agrees to purchase all shares of a public offering at an agreed- upon price
Dow Jones Industrial Average
index that tracks stock prices of thirty large, well known US corporations
Standard and Poor's 500
stock index based on prices of 500 major US corporations in a variety of industries and market sectors.