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Glossary

 

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Treasury Bill (T- Bill) A fixed-income security issued by the U.S. Government.
Takeover The acquisition of control over a corporation by another company, which normally ousts the current management. The takeover can occur by means of a proxy fight or the acquisition of a controlling quantity of common stock.
Talisman The Exchange's computerized settlement system.
Target Fund A mutual fund containing bonds that mature in a single year, giving the entire fund a terminal maturity in that year.
Target Maturity Fund A fund that invests primarily in zero coupon U.S. Treasury securities, or in coupon-bearing U.S. government securities targeted to mature in a specific year.
Tax Anticipation Bill Short-term security similar to a T bill that is accepted at par in payment of corporate federal taxes.
Tax Anticipation Note A municipal note issued in anticipation of revenues from a future tax.
Tax Exempt Bonds Municipal securities (whose interest is free from federal income tax).
Tax Preferences Certain tax-related benefits that create unusual tax savings, such as accelerated depreciation and tax-exempt interest from certain municipal bonds.
Tax-Deferred Tax treatment of certain products and investments that results in income taxation only upon maturity or withdrawal of funds.
Tax-Deferred Life Insurance Cash Value Funds held in a life insurance policy that exceed the amount used in the current year for administrative and mortality expenses. Earnings on these funds are generally not taxed until withdrawn.
Tax-Exempt Bond Fund A fund that invests in municipal bonds. While investors do not pay federal income taxes on the income from these funds, they may be subject to state or local taxes.
Tax-Exempt Bonds Securities issued by states, cities and other public authorities, the interest from which is either wholly or partly exempt from federal income tax and possibly from state or local income taxes.
Tax-Exempt Interest The interest earned on tax-exempt securities is not included in the investor's gross income for regular federal income tax purposes. Depending on the original use of the money when the security was issued, the interest may be subject to alternative minimum tax. In most states, the income from municipal bonds issued within that state is tax-exempt to residents of the state.
Tax-Sheltered Annuity (TSA) A 403(b) plan that invests in an annuity. See 403(b) plan.
Tax-Sheltered Custodial Account (TSCA) A 403(b) plan that invests in mutual funds. See 403(b) plan.
Taxable Asset Status Assets that are not tax-exempt or tax-deferred are considered "taxable." This means the income derived from the asset is taxed in the year it is produced. Tax-deferred assets include assets held in an IRA, 401(k) plan, 403(b) plan, non qualified tax-deferred annuity, tax-deferred annuity, tax-deferred life insurance cash value and other qualified assets.
Taxable Equivalent Yield The yield that would have to be earned on a security to pay as much, after tax, as what is earned from a tax-exempt bond.
Taxable Income The amount of income used to compute tax liability. It is calculated by starting with adjusted gross income, subtracting itemized deductions or the standard deduction and then subtracting the amount allowed for personal exemptions.
Technology Fund A fund that invests primarily in the stocks of companies engaged in the technology industry.
Telephone Switching The movement of an investor's funds from one mutual fund to another on the basis of an order given via telephone.
Tenancy by the Entirety Joint tenancy ownership between spouses. This type of property ownership is used only in certain states. See Joint tenancy.
Tenancy In Common Type of ownership of property by two or more persons in which each owns an undivided interest in the whole. Upon the death of a co-tenant, the deceased person's interest passes as part of the estate through probate: the interest does not pass directly to the remaining co-tenant(s).
Tender Offer The offer made by one company or individual for shares of another company. The offer may be in the form of cash or securities.
Term Life Insurance Life insurance that provides financial protection for a specified period of time. If death occurs during this period, the face amount of the policy is paid to the beneficiary. If the insured person survives through the period of coverage, no payment is made.
Term Maturity Bonds of an issue all mature on the same date.
Term Structure Of Interest Rates A graph representing the yield to maturity of Treasury securities at identified years of maturity.
Testator A person who dies leaving a will. The female form is Testatrix.
Top Down An investment approach that first seeks to define major economic and industry trends, and then proceeds to identify specific companies that are likely to benefit from those trends. (See also "bottom-up.")
Total Income All income received during a year including taxable income and tax-exempt income. It does not include tax-deferred income.
Total Return A measure of a fund's performance that takes three factors into account: income dividends, capital gains distributions, and share price appreciation/depreciation.
Trade Confirmation Written verification and information concerning a transaction that is sent to the customer on or before the first business day following the trade date.
Trade Date The date on which a purchase or redemption of mutual fund shares is conducted.
Traded Options Transferable Options with the right to buy and sell a standardized amount of a security at a fixed price within a specified period.
Trading Authorization Written permission for one to trade in another's account.
Transfer The process by which securities are reregistered to new owners. The old securities are canceled and new ones issued to the new registrants.
Transfer Agent A commercial bank that retains the names and addresses of registered securities owners and that reregisters traded securities to the name of the new owners.
Treasuries Fixed income securities issued by the U.S. government. Treasuries include:
Treasury Bills Obligations issued by the Department of the Treasury maturing in 13, 26, or 52 weeks.
Treasury Bond Long-term (10 to 30 years), fixed interest government debt security.
Treasury Direct The program through which investors may purchase new issues of Treasury bills, notes, and bonds directly from the Federal Reserve.
Treasury Note Medium-term (1 to 10 years), fixed interest government debt security.
Triple Tax-Exempt Fund A municipal bond mutual fund whose dividends and interest are exempt from federal, state and local income taxes for residents of a particular state.
Trust A form of property ownership under which the legal title to property is held by one person ("trustee") for the benefit of another person ("beneficiary").
Trust (Irrevocable) A trust which may not be terminated after its creation by the grantor
Trust (Living) A trust created by a person during his or her lifetime
Trust (Revocable ) A trust in which the grantor reserves the right to terminate the trust.
Turnover Rate The rate at which the fund buys and sells securities each year. For example, if a fund's assets total $100 million and the fund bought and sold $100 million of securities that year, its portfolio turnover rate would be 100%.
Two-Dollar Broker An exchange member who executes orders from other member firms and charges a fee for each execution.
Underlying Security The security on which options are being bought or sold.
Underwriter The organization that acts as the distributor of new shares to broker/dealers and investors. In a municipal underwriting, a brokerage firm or bank that acts as a conduit by taking the new issue from the municipality and reselling it. In a corporate offering, the underwriter must be a brokerage firm.
Underwriting The process by which investment bankers bring new issues to the market.
Underwriting Manager (1) In a negotiated underwriting, the investment banker whose client is the corporation wanting to bring out a new issue. (2) In a competitive underwriting, the lead firm in a group that is competing with other group(s) for a new issue.
Unified Credit A once-in-a-lifetime credit that may be applied against an individual's federal gift or estate taxes. The current credit is $192,800, which is equivalent to exempting $600,000 from federal gift or estate taxes.
Uniform Gift to Minors Accounts (UGMA) A method of securities ownership whereby parents or other relatives may contribute cash or securities to children. Portions of returns generated by the securities are taxed at the children's tax bracket instead of parents' presumably higher bracket.
Uniform Practice Code Part of the NASD rules that govern the dealing of firms with each other.
Unit At issuance, a "package" of securities, such as a bond and warrant, which become separable at a later date.
Unit Investment Trust See Unit Trust
Unit Trust An investment similar to a mutual fund (that is, the trust receives money from investors and uses it to purchase a portfolio of securities) that has a specific date on which the holdings will be sold and all the earnings and gains returned to investors. Commonly, the portfolio of securities is comprised of bonds and is left unchanged after it is originally selected.
Universal Life Insurance A type of permanent life insurance that permits the owner to vary the amount of protection and premiums to reflect changing needs. Earnings on the cash value accumulate tax-deferred.
Unlisted Securities Market (USM) The Exchange's market for medium-sized companies which do not qualify for, or do not wish to have a full listing.
Unlisted Security (1) A security which has not been admitted to the Stock Exchange's Daily Official List. Usually the issuer will be an unlisted company, but not always; it is not uncommon for a company to apply for its Ordinary Shares to be listed but not its loan stocks, or vice versa. (2) A security traded on the USM.
Unrealized Gain or Loss Increases or decreases in the prices of securities held by the fund. Unscheduled repayment of principal : can shorten the maturity of the bonds. (See "Prepayment Risk.")
Unwind An advanced option order that is used with the intention of closing an existing Buy/Write or Sell/Write position.
Uptick A listed equity trade at a price that is higher than that of the last sale.
Utility Fund A fund that invests primarily in securities issued by companies in the utilities industry.
Value Investing The investment style of attempting to buy underpriced stocks that have the potential to perform well and increase in price.
Variable Annuity A type of insurance contract that guarantees future payments to the holder, or annuitant. Capital accumulates tax-free, often through investment in a mutual fund, and is converted to an income stream at a future date (usually retirement). All monies held in the annuity accumulate on a tax-deferred basis.
Variable Universal Life Insurance A type of permanent life insurance that permits the owner to vary the amount of protection and premiums and also builds cash value that can be invested in a variety of investment portfolios. Investment earnings on the cash value accumulate tax-deferred and the policy owner can transfer funds among investment portfolios with varying objectives.
Volatility The amount by which the price of a security fluctuates as market conditions change.
Voluntary Accumulation Plan A plan to acquire additional shares in a mutual fund on a more or less regular basis, at the discretion of the shareholder.
Voting Trust The deposit of shares with a trustee to gain long-term corporate control.
Warrant A security that allows the owner to purchase the issuing corporation's stock for a certain price over stated period. That period could be 10 or 20 years, and the price of the conversion is much higher than the current price of stock issue. A warrant is usually issued with another security, such as one warranty plus one bond, both of which form one unit.
Weighted Average Maturity The arithmetic mean of maturities of securities held by a mutual fund.
White Knight A company that rescues another in financial difficulty, especially one which saves a company from an unwelcome takeover bid.
Whole Life Insurance Life insurance that provides protection for the entire life of the insured person, generally with a fixed face amount and fixed premiums.
Will A document that directs how a person's property is to be distributed after death. It may also be used to nominate a person to serve as the guardian of minor children and the executor of the estate.
Withdrawal Plan A program in which shareholders receive payments from their mutual fund investments at regular intervals.
Work-Out Quote Subject quote in which the trader estimates the price at which he thinks the security can be bought or sold if given time to find a market.
Writer Seller of an option contract to open.
X-Inefficiency A term from microeconomics describing the difference between the actual output cost of one unit of production and the minimum attainable cost of one unit of that product. This difference may be the result of management shortcomings, inefficient use of resources, bureaucratic rigidities, motivation of employees etc.
Yellow Sheets Wholesale quote sheet for corporate bonds used by dealers.
Yield The rate of return on an investment. There are as many computations as there are different yields, such as current yield and yield to maturity. For example, bonds provide income in the form of interest, and stocks in the form of dividends.
Yield Advantage The additional income an investor will receive on purchasing a convertible security instead of the ordinary share of the same company assuming that the security can be converted into those same ordinary shares. For the calculation to be meaningful, allowance must be made for the conversion costs, reflected in the differential between the conversion price and the current market price.
Yield Curve A graph depicting yield as it relates to maturity. If short-term rates are lower than long-term rates, it is called a positive yield curve. If short-term rates are higher, it is called a negative, or inverted, yield curve. If there is little difference, it is called a flat yield curve.
Yield Elbow The point on the yield curve that indicates the year at which the economy's highest interest rates occur.
Yield To Call The percentage a bond will yield to the date at which it is eligible to be redeemed by its issuer.
Yield To Maturity (YTM) The effective annual rate of return earned by a bond if held to maturity. This rate takes into account the amount paid for the bond, the length of time to maturity, and assumes coupon payments can be reinvested at the yield to maturity. <!-- End Index--><DL>
Zero Coupon Bond Bond issued at a discount which accrues interest that is paid in full at maturity.
Zero Coupon CD A certificate of deposit that pays interest only upon maturity.
Zero-Minus Tick A stock trade at a price equal to the preceding trade but lower than the last different price.
Zero-Plus Tick Term given to a sale made at the same price as the trade that preceded it providing that the previous trade was above the price of the sale it proceeded.
Zero-Sum Game A situation in which one party's gain is always equal to the other party's loss. The gains and losses in this situation always sum to zero, hence the term. A bet is a zero-sum game where, if the punter makes a profit, the bookmaker makes an equivalent loss (ignoring tax) and vice versa. This is the same for derivatives and options where the punter is the investor and the bookmaker is the writer, either another punter or an institution. It is, however, quite different in physical markets, where actual stocks, bonds or tangible assets are traded. If an investor buys a share and its value rises, this is not matched by a corresponding loss but made up by an increase in the intrinsic value of the holding and the worth of the yield or dividend, which represents profits earned by a trading companywealth is actually created in these circumstances. There is no net wealth creation in a zero-sum game.
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