Definitions

Question 1

Retail Investors

Answer 1

individuals who purchase securities for their own accounts. Retail investors generally execute smaller trades and generally do nor possess the degree of investing sophistication that more seasoned institutional investors have.

Question 2

Regulation T

Answer 2

used with MARGIN Accounts. The term Regulation T refers to Federal Reserve regulation covering the extension of credit to customers. Basically, you are borrowing up to 50% of the purchase price of securities and 50% is funded with cash. Requires payment for purchases of securities MUST be received by the fourth business day after the trade date… ( T+ 4).

Question 3

Bonds

Answer 3

bonds are loans. When you buy a bond, you are lending money to an organization whether it be a public corporation, federal government, or a municipality. Bonds differ from common and preferred stock in that they do NOT represent an ownership interest. Instead, bonds represent a DEBT obligation of the issuing organization. Therefore, bonds are classified as debt securities and the investor becomes the CREDITOR who RECIEVES interest payments for lending their capital.

Question 4

Collateralized Mortgage Obligation(CMO)

Answer 4

is a bond that is secured by a pool of mortgage loans. CMOs are mortgage-backed securities.

Question 5

Back-end load

Answer 5

The sales load that an investor pays redeeming mutual fund shares.

Question 6

Balance of Payments

Answer 6

Refers to money flowing into and out of the U.S. If a Balance of Payments deficit exists, the deficit would increase due to the following: 1. An increase in U.S. investments abroad. 2. U.S. loans to other countries. 3. U.S. tourists spending abroad. 4. A raising of interest and dividends owned by foreigners. A U.S. Balance of Payments deficit would improve or lessen with: 1. New foreign investments in the U.S. 2. Commodity exports. 3. Spending by foreign tourists in the U.S. 4. Increase in interest and dividends earned on foreign investments.

Question 7

Balance Sheet (Corporation)

Answer 7

The Balance Sheet of a corporation shows all of the assets and liabilities as of a particular date, usually by the end of the year. The basic balance sheet equation is: Total Assets = Total Liabilities + Net Worth

Question 8

Balance Sheet (Personal)

Answer 8

Personal Balance Sheet may be constructed at a point in time and is used to create a trend and calculate estate tax. The basic balance sheet equation is: Assets = Liabilities + Equity

Question 9

Bank Guarantee Letter

Answer 9

Issued by an Options Clearing Corporation (OCC) approved bank. The Letter states that a particular customer has funds equal to the aggregate exercise of a put option which has been sold. The Bank agrees to deliver the funds to the broker-dealer if the option is exercised against the customer

Question 10

Bank Secrecy Act

Answer 10

Federal anti-money laundering and counter-terrorism statue.

Question 11

Banker’s Acceptance

Answer 11

A money market instrument designed primarily to enable businessmen to finance foreign trade. It is a draft or bill exchange that becomes a money market instrument when payment is guaranteed by a bank. Banker’s Acceptance are normally issued on a discount basis and mature within nine months.

Question 12

Barbell Portfolio

Answer 12

A portfolio of bonds with concentrations of short and long term maturities but very few mid-range maturities. The portfolio is adjusted to maintain the long and short distributions.

Question 13

Basic Balance Sheet Equation

Answer 13

Assets = Liabilities + Stockholder’s Equity. All of the assets of a corporation equal to the claims against them. Assets are anything of value owned by a corporation. Liabilities are claims of creditors against the assets. Stockholder’s Equity represents the claims of owners against the assets.

Question 14

Basis Point

Answer 14

Represents 1/100 of one percent in terms of yield. Assume Bond A has a yield of 6.75% and Bond B has a yield of 6.50%; the difference in the two yields is 25 basis points.

Question 15

Bearish

Answer 15

An investor that expects the market price of the stock to decrease or go down.

Question 16

Bearish Call Spread

Answer 16

An investor purchases the call with a higher strike price and sells the call with a lower strike price. Assume a customer puts on the following bearish call spread: Long 1 ABC July 60 call at 1, Short 1 ABC July 50 call at 7

Question 17

Benchmark

Answer 17

A point of reference to measure investor’s portfolio or security returns. Benchmarks vary and are used for many asset classes such as stocks, bonds, and commodities. A benchmark can be an interest rate, the value of a group of stocks, or bonds. However, the most common benchmark are indices, with the S&P 500 the most common benchmark that stock portfolio managers track.

Question 18

Best Efforts Underwriting

Answer 18

The underwriting group acts as agent in attempting to distribute a new issue to the public.

Question 19

Best Execution

Answer 19

in any transaction for or with a customer or a customer of another broker-dealer, member firms and persons associated with a member firm must use reasonable diligence to ascertain the best market for the subject security and buy or sell in such market so that the price to the customer is as favorable as possible under prevailing market conditions.

Question 20

Beta

Answer 20

A statistical measure used to assess the volatility of a particular security to the market as a whole. Stocks with a beta of 1.0 are expected to fluctuate more than the general market, while those with a beta of less than 1.0 are expected to fluctuate less than the general market

Question 21

Bid

Answer 21

In equities trading, the bid is the price at which a market maker is willing to buy shares from a seller

Question 22

Bid Form

Answer 22

Underwriters bidding on a new issue of municipal securities during a competitive underwriting submit this form and the interest rate proposed for the issue. The issuer normally grants the issue to the underwriting syndicate with the lowest net interest cost.

Question 23

Bid Wanted

Answer 23

For inactively traded securities, a Bid Wanted (BW) indication may be placed in the Pink Sheets by a dealer. For example, a quotation for XYZ may be indicated as follows: XYZ BW - 14 This means the dealer is indicating an interest to sell shares at $14, but is seeking a bid from another dealer.

Question 24

Binary Options

Answer 24

Options that have one of two outcomes: If the option is at-the-money or in-the-money, the investor gets the fixed amount depending on the option ($100 or $1,000). If the option is out-of-the-money, the investor gets $0.

Question 25

Black-Scholes Pricing Model

Answer 25

Attempts to determine whether an option is fairly priced, over-valued or undervalued. It considers the price of the underlying stock, the strike price, time until expiration, volatility of the underlying stock, interest rates, and the risk-free rate of return.

Question 26

Block Trade

Answer 26

A large number of shares traded at one time. Under NYSE rules, it is defined as at least 10,000 shares or a quantity of stock with a market of value of $200,000 or more. Blotter-Blotters are records of original entry such as journals, diaries, and day books.

Question 27

Blotter

Answer 27

A list or log generally of activity which takes place in the branch office of a broker-dealer. It is a temporary record until such activities are transferred to permanent record books.

Question 28

Blue Chip Stock

Answer 28

Stock issued by a nationally known company that has a good reputation for quality of management, products, and services. Blue Chip Stocks are expected to pay dividends in good times and in bad times. They will generally maintain about a 50% Dividend Payout Ratio.

Question 29

Blue List

Answer 29

It is a daily publication which lists municipal bonds being offered by dealers. It contains information such as the name of the issuer, par value, interest rate, maturity date, price or yield, and the dealer offering the bond

Question 30

Blue Sky Laws

Answer 30

State securities laws are referred to as "blue sky laws." The purpose of these laws is to protect against fraudulent transactions with a particular state.

Question 31

Board of Directors

Answer 31

Elected by stockholders of a corporation to manage the entity. The Board of Directors appoints the management of the corporation.

Question 32

Bond

Answer 32

Bonds are loans. When an investor buys a bond, the investor is lending money to an organization whether it be a public corporation, the federal government, or a municipality. Bonds represent a debt obligation of the issuing organization and are classified as debt securities.

Question 33

Bond Buyer

Answer 33

The name of an organization that publishes the Daily Bond Buyer and Weekly Bond Buyer. Any significant new issue of a municipal bond will be advertised in the Daily Bond Buyer through a Notice of Sale

Question 34

Bonus Annuity

Answer 34

New annuity contract that provides an extra 3% to 5% premium credit as an incentive to buy the annuity. This benefit typically comes with higher contract costs and longer surrender periods subject to surrender charges.

Question 35

Book Entry

Answer 35

A security issue which is not available to a purchaser in physical form. The owner of a book entry security has a book entry advice of confirmation as proof of ownership. Book entry securities transfer by journal entry.

Question 36

Book value per share

Answer 36

Total shareholder's equity - preferred stock/ Common shares outstanding

Question 37

Bottom-Up Investing

Answer 37

An investment analysis approach that starts with a company-by-company analysis of individual firms.

Question 38

Brady Bond

Answer 38

U.S. Dollar- denominated bonds issued by Latin American countries that are collateralized by U.S. Treasury zero-coupon bonds.

Question 39

Branch Office

Answer 39

FINRA definition: Any location where one or more associated persons of a member regularly conducts the business of effecting any transactions in, or inducing, or attempting to induce the purchase or sale of any security, or a location that is held out as such.

Question 40

Breakeven

Answer 40

Options- The point at which the buyer or seller of an option will not realize a gain or loss.

Question 41

Breakpoint

Answer 41

Refers to the minimum dollar amount of mutual fund shares purchased that will give the customer a volume discount. For example, a customer who invests $20,000 pays a sales charge of 8% on mutual fund while a customer who invests less than $20,000 would pay a sales charge of 8 1/2%.

Question 42

Brochure Rule

Answer 42

Part 2 of Form ADV which requires that investment advisers to make certain disclosures to prospective clients and existing clients.

Question 43

Broker

Answer 43

A broker acts in an agency capacity bringing a buyer and seller together in a securities transaction for compensation via commission.

Question 44

Broker Loan Rate

Answer 44

The interest rate that banks charge broker-dealers who borrow money using customers' securities as collateral. This is also referred to as the "Call Loan Rate".

Question 45

BrokerCheck

Answer 45

FINRA has developed Broker Check to provide information about FINRA-registered firms and brokers to help investors determine whether to conduct, or continue to conduct, business with these brokerage firms and brokers.

Question 46

Broker-Dealer

Answer 46

Any person engaged in the business of effecting or attempting to effect transactions in securities for the accounts of others or for his/her own account.

Question 47

Bullish

Answer 47

An investor that expects the market price of a stock to increase or go higher. Bullish Call Spread- Buying a call with a lower strike price and selling a call with a higher strike price. For example, assume a customer engages in the following: Sell 1 ABC July 30 call @ 1, and Buy 1 ABC July 20 call @ 5

Question 48

Business Continuity Plan

Answer 48

Business Continuity Plans are designed to address natural disasters and other forms of disruption that may occur due to unforeseen circumstances. They include planning for alternative means of communication, data back-up and recovery methods, and even alternative physical locations for an office. BCPs do not deal with day-to-day business issues such as customer fraud, margin deficiencies, or technological advancements.

Question 49

Business Cycle

Answer 49

Refers to increases and decreases in economic activity over a period of time. The Business Cycle has four major phases: Peak - Recession - Trough - Recovery.

Question 50

Business Enterprises

Answer 50

The main forms of business enterprises are sole proprietorship, partnerships, and corporations. Owners of sole proprietorships and general partners in a partnership have unlimited personal liability for the debts of the business enterprise. Stockholders in a corporation have limited liability and can only lose the amount of their investment in the corporation.

Question 51

Business Risk

Answer 51

Type of Unsystematic Risk, also known as Credit Risk or Financial Risk, and is the risk associated with the unique situation that an individual company will fail (go bankrupt).

Question 52

Butterfly Spread

Answer 52

A neutral option strategy that has limited risk and limited profit potential. It is the combination of a Bull Spread and a Bear Spread using 3 strike prices, using either calls or puts, and done at either a net credit or net debit.

Question 53

Buy-In (Close-out by Purchaser)-

Answer 53

A buy-in occurs when the selling broker has not completed the transaction (delivered the securities) according to its terms.

Question 54

Buy-Write Strategy

Answer 54

Investors that buy stock and write covered calls for income, generally with the intent of increasing their rate of return and the intent of lowering volatility.

Question 55

C Corporation

Answer 55

A “C” Corporation is a legal and taxable entity separate from its owners. It is owned by shareholders. An advantage is shareholders have limited liability. A disadvantage is it is subject to double taxation.

Question 56

Calendar Spread

Answer 56

An option spread in which the strike prices are the same and the expiration months are different. Assume a customer puts on the following spread position: Sell 1 ABC April 40 call @ 5, and Buy 1 ABC July 40 call @ 8. This is a calendar spread since the strike prices are the same and the expiration months are different.

Question 57

Call (Reinvestment)- Risk

Answer 57

The risk that bondholders will have their bonds called or redeemed prior to maturity. The bonds would be redeemed by the issuer if interest rates declined. This would leave the bondholders reinvesting their money at a lower return.

Question 58

Call Option

Answer 58

In the equities market, the right but not the obligation to buy 100 shares of a particular stock at a predetermined price.

Question 59

Call Protection

Answer 59

A fixed time period during which a bond may not be called by the issuer. It is valuable to an investor when interest rates are falling since the issuer cannot call the bond away from the investor. An investor interested in call protection would not purchase a premium bond callable at par.

Question 60

Callable Bond

Answer 60

A feature added to bonds that allow the issuer to redeem the bond before maturity, at a pre-established premium price, after a specified date. The “call provision” of a callable bond will specify the callable date and price at which the bond will be called.

Question 61

Capital Asset Pricing Model (CAPM)-

Answer 61

A model that measures expected returns in relation to the amount of risk that an investment carries.

Question 62

Capital Gain Distribution

Answer 62

A distribution made by an investment company from long-term capital gains realized by its portfolio.

Question 63

Capital Gain or Loss

Answer 63

Realized on the sales of a capital asset such as a security. A capital gain is realized when the sales proceeds from a capital asset exceed the cost basis. A capital loss is realized when the sales proceeds are less than the cost basis.

Question 64

Capital Market

Answer 64

Markets where long-term debt and equity instruments are traded. Capital Markets consist of stock exchanges and the over-the-counter market. Capital Market instruments include items such as equities (common and preferred stock), corporate, municipal and U.S. Government bonds and mortgages.

Question 65

Capping

Answer 65

Selling stock short to keep the price of the underlying stock down so that calls will expire worthless and the writer can keep the premium.

Question 66

Cash Account

Answer 66

A securities account in which the customer pays for a purchase of securities in full. The entire risk of the market value of the securities is placed on the customer.

Question 67

Cash Flow

Answer 67

for a corporation is defined as Net Income plus Depreciation or Net Loss plus Depreciation.

Question 68

Cash Flow Statement

Answer 68

A financial statement that, over a period of time, tracks cash inflows and outflows in order to determine the net cash flow for a specified period of time (month, quarter, annual)

Question 69

Cash on Delivery (COD)-

Answer 69

Is a type of order settlement and acceptance used by large institutional traders that use large commercial banks as the clearing agent to settle trades. The purpose is to ensure simultaneous, prompt delivery of securities and payment of cash. Cash on Delivery is used when the customer is the purchaser.

Question 70

Cash Transaction

Answer 70

A securities trade where trade date and settlement date are the same day. A customer who engages in a cash transaction normally receives a less favorable price than he would receive on a regular way transaction.

Question 71

CBOE Trading Rotations

Answer 71

Upon the opening of the market, as soon as the stock opens, each class of options will open sequentially from the earliest expiration month with the lowest exercise price out to the highest.

Question 72

Certificate of Limited Partnership

Answer 72

Filed with the state and describes the operation of the Limited Partnership. It states the name of the General Partner and the names of all Limited Partners. The General Partner is responsible for the debts of the Limited Partnership, while the Limited Partners can only lose the amount of their investment in the Limited Partnership.

Question 73

Chapter 11 Filing

Answer 73

A type of bankruptcy filing generally used by a business rather than an individual and allows the business to reorganize and repay its creditors.

Question 74

Chapter 13 Filing

Answer 74

A type of bankruptcy filings in which the individual agrees to repay all or some of his debt, generally over a 3-5 year period. To qualify for Chapter 13, the individual must have a steady income.

Question 75

Chapter 7 Filing

Answer 75

A type of bankruptcy filing in which the person's property and debts are in the hands of the bankruptcy court. If real estate owned by the person in bankruptcy is sold, the mortgage holder is paid first and any excess funds are paid to creditors and all other claims by the court appointed bankruptcy trustee.

Question 76

Charitable Foundation

Answer 76

Legal non-government, non-profit organization or charitable trust with the purpose of making grants to unrelated organizations or individuals for educational, religious, or other charitable purposes.

Question 77

Chinese Wall (Information Barriers)

Answer 77

An imaginary barrier between the investment banking department, research department, and trading/market making departments. Its main purpose is to prevent material, non-public information from being shared between departments within a broker-dealer, thereby promoting confidentiality and trust with the investing public.

Question 78

Class A Shares

Answer 78

Mutual funds that charge investors an upfront sales charge.

Question 79

Class B Shares

Answer 79

Mutual funds that are back-end loaded funds, They do not have upfront sales charges. The back-end load sales charge often decline the longer the investor holds the fund.

Question 80

Class C Shares

Answer 80

Mutual funds that have no upfront sales load and no back- end load, but have the highest annual expense charges.

Question 81

Clearly Erroneous Trade

Answer 81

A trade where there is an obvious error in any term of the transaction, such as the price, number of shares, the unit of trading, or ID of a security when declaring a transaction.

Question 82

Closed-End Fund

Answer 82

Type of investment company that has a fixed number of shares outstanding. They are traded over-the-counter or listed on a national securities exchange.

Question 83

Collateralized Mortgage Obligation (CMO)-

Answer 83

A Collateralized Mortgage Obligation (CMO) is a mortgage-backed bond secured by a pool of mortgage loans. CMO's separate mortgage pools into different maturity classes called "tranches". The tranches generally pay fixed rates of interest at regular intervals and may mature in two, five, ten, or twenty years. Most CMO's carry a AAA rating and interest payments to investors are subject to Federal, State, and Local taxes. An investor seeking a short-term investment may purchase a two-year tranche, while a long-term investor may purchase a 20-year tranche.

Question 84

Combination Primary and Secondary Offering

Answer 84

A securities offering whereby part of the shares have already been issued and are being sold by unissued shares of the corporation and part of the shares are from officers and directors.

Question 85

Commercial Paper

Answer 85

Commercial paper represents an unsecured promissory note of a corporation. The notes are normally issued at a discount and redeemed at face value. These notes are not guaranteed by the FDIC and may be sold directly by the issuer.

Question 86

Commodities

Answer 86

Raw materials we use to live, trade, and store. Energy, metals, and agricultural products are the three classes of commodities, and they are the essential building blocks of the global economy.

Question 87

Common Stock

Answer 87

Represents fractional ownership in a corporation. Owners of common stock have certain rights, including the right to vote, the right to receive declared dividends, and the right to sell their shares.

Question 88

Competitive Bidding (Municipal Securities)-

Answer 88

A type of municipal securities underwriting in which the municipality (issuer) requests sealed bids from underwriters or underwriting syndicates for a proposed new offering. The municipality will then select the underwriter to lead the offering. Most general obligation bonds are awarded on the basis of competitive bidding.

Question 89

Competitive Risk

Answer 89

Type of Unsystematic Risk- risk that a company will fail to keep up with competing firms and new developments in the industry or sector.

Question 90

Completion of a Transaction

Answer 90

The time when a customer pays the broker-dealer or the time a bookkeeping entry is made by the broker-dealer and/or the time when the security is delivered after payment for the security is made.

Question 91

Computer Assisted Execution System (CAES)-

Answer 91

Allows member firms that are market makers in exchange-listed securities to direct buy and sell orders to each other.

Question 92

Conduit Tax Treatment

Answer 92

With conduit or pass-through tax treatment, gains and losses are passed through an entity and onto the investors in the entity, avoiding taxation at the entity level. Entities like c-corporations pay taxes as an entity and shareholders are also responsible for taxes on dividends and capital gains/losses (Double Taxation). With conduit tax treatment, taxation at the entity level is avoided and investors bear the tax burden of gains and losses.

Question 93

Confirmation

Answer 93

A record sent to a customer documenting the details of a trade. A confirmation must be sent out to a customer on a securities transaction by the next business day after trade date.

Question 94

Consolidated Tape

Answer 94

A computerized system that displays the stock symbol, latest price, and volume on securities traded on the floor of the stock exchange.

Question 95

Constant Dollar Investment Plan (Dollar Cost Averaging

Answer 95

Defined as investing a fixed amount of dollars at set intervals, such as monthly, regardless of the prices of securities purchased in the account. For example, buying $250 per month of Mutual Fund A in an account, regardless of share price of Mutual Fund A.

Question 96

Consumer Price Index

Answer 96

Published monthly by the U.S. Government, it measures the average change in prices for selected goods and services in selected U.S. cities.

Question 97

Contingent Beneficiary

Answer 97

A beneficiary that receives a bequest from a financial account if the primary beneficiary cannot or will not accept the bequest. Contingent beneficiaries can be thought of as secondary beneficiaries that fall in line behind primary beneficiaries.

Question 98

Contingent Immunization Strategy

Answer 98

Strategy whereby a portfolio manager has the opportunity to actively manage a portfolio, but if the returns fall below a specified level, active management ceases and immunization of the portfolio occurs. Immunization of a portfolio takes place when the duration of a portfolio’s assets equal the duration of the portfolio’s liabilities.

Question 99

Contrarian Investor

Answer 99

An investor who does the opposite of what most investors are doing at any particular time.

Question 100

Control Securities

Answer 100

Control securities are those owned by a control person or affiliated person of a company (officers, directors, principal stockholders). Control shares can be registered or unregistered.

Question 101

Convertible Bond

Answer 101

Debt securities that have one key feature: They give convertible bond holders the option to convert their bonds to shares of common stock of the issuer.

Question 102

Coordination

Answer 102

Refers to registration of a security at the state level by a concurrent registration filing with the SEC. When the SEC or Federal registration becomes effective, the state registration becomes effective as well.

Question 103

Corporate Bond

Answer 103

A corporate bond is a debt instrument (company is borrowing money from investors) which generally has a fixed rate of interest which is paid semi-annually. Par or principal value is $1000. Since corporate bonds pay a fixed rate of interest semi-annually they are also referred to as a fixed income security

Question 104

Corporate By-Laws (Resolution)

Answer 104

Corporate By-Laws, which can be amended by the Board of Directors, authorize a corporation to open a cash or margin account with a broker-dealer. A Corporate Resolution allows certain employees to act on behalf of the corporation.

Question 105

Cost Basis Stock

Answer 105

The cost basis of stock purchased by a customer is the market value of the security plus any commissions paid. If the customer's sales proceeds exceed his cost basis, a capital gain is realized.

Question 106

Cost-to-equity ratio

Answer 106

Measures how expensive the trading in the account has been. Can be a tool used to explore whether churning has occurred. To calculate the cost-to-equity ratio, divide the total annual costs by the account’s average balance. Covenant-Contractual obligations set forth in a bond contract that promise certain acts will be performed and others will be refrained from. Also known as restrictive covenant or protective covenant.

Question 107

Covered Call Option

Answer 107

A situation where a customer owns securities and sells a call option contract against the securities. In equity options, an investor who owns 100 shares of stock and sells a call would be “covered”.

Question 108

Covered Put Option

Answer 108

Put writers are considered 'covered' if they have funds equal to the aggregate exercise price on deposit. Investors have limited loss potential.

Question 109

CQS (Consolidated Quotation Service)

Answer 109

CQS provides, on a current and continuous basis, the best quote (bid and ask) and size available at a given time in all eligible listed securities in the system.

Question 110

Credit Agreement

Answer 110

A document for a margin account that requires a broker-dealer extending credit to a customer to disclose the terms and conditions under which such financing will be maintained.

Question 111

Credit Balance

Answer 111

In a short margin account, the credit balance is the amount that results from the short sale of borrowed stock plus the Reg T deposit made by the customer.

Question 112

Credit Risk

Answer 112

The risk that a company will declare bankruptcy or financial obligations won’t be met.

Question 113

Credit Spread (Options)

Answer 113

When an investor puts on an option spread (buy & sell), and the premiums result in a positive number.

Question 114

Credit Spread

Answer 114

The difference between two bonds of similar maturity, generally a corporate bond and a Treasury bond.

Question 115

Crowdfunding

Answer 115

Under the Jobs Act, allows small companies to raise funds (within limits) from investors.

Question 116

Currency Transaction Reporting (CTR)-

Answer 116

Financial firms must file Currency Transaction Reports for transactions involving currency (cash) over $10,000 for one person in the aggregate in a single business day. If a person has a financial account in a foreign country, that person must report the relationship if the aggregate value of the account exceeds $10,000.

Question 117

Current Asset

Answer 117

Any asset that is likely to be converted to cash within the next 12 months.Current LiabilityAny liability or expense that is due within the next 12 months. Examples are accounts payable, notes payable, taxes, and dividends payable. Current Ratio- Current Assets divided by Current Liabilities. It measures the liquidity position of a corporation.

Question 118

Current Yield

Answer 118

For a bond, this is defined as the Annual Interest Paid divided by the Market Price of the bond. For a stock, it is defined as the Annual Dividend Paid divided by the Market Price of the stock. It represents the actual income rate of return to the investor.

Question 119

CUSIP

Answer 119

A standard numbering system used to identify security positions.

Question 120

Custodian (UGMA)-

Answer 120

A custodian is a fiduciary who manages an UGMA/UTMA account for the benefit of a minor. Only one custodian and one minor are allowed per account.

Question 121

Customer Identification Program (CIP)-

Answer 121

A key step in the new account opening process. Federal regulations under the U.S. Patriot Act require that broker-dealers identify every customer who does business with them, check the client's name to a terrorist list, and check the client's residence to an embargoed countries list.

Question 122

Customer's Agreement

Answer 122

A document that sets forth the privileges and conditions under which the firm will finance customer credit (margin) transactions. This must be signed before a margin account is opened. Also called a Hypothecation Agreement, or Margin Agreement.

Question 123

Cyclical Stock

Answer 123

- A stock that is susceptible to fluctuation related to various different cycles. The most common cycle would be the business cycle, with the stock increasing in value as the business cycle expands and the stock decreasing in value as the business cycle contracts.