C- Corporation – Taxable entities that can have an unlimited number of shareholders. C Corporations that have excess funds to invest can take advantage of a tax benefit called the corporate dividend exclusion. If they invest in dividend paying stocks then seventy (70) percent of the cash dividends received from investments made in other corporate common and preferred stocks are excluded from tax.
Call Option – A contract that gives an investor the right (but not the obligation) to buy a fixed amount of securities at a specified price within a specific time period.
Call Risk – The risk that an issuer will call outstanding bond or preferred stock issues prior to their maturity date in periods of falling interest rates.
Callable Bond – A bond that the issuer has the option to call before the maturity date. Usually the bond is called at a premium.
Chicago Board Options
Exchange (CBOE) – An exchange where stock options, equity LEAPS, index options, and interest rate options are traded.
Certificate of Deposit (CD) – A short-term money market instrument issued by a bank at par that repays principal and interest at maturity.
Securities offered through Registered Representatives of NFP Securities, Inc., a Broker/Dealer and
Member FINRA/SIPC. Investment Advisory Services offered through Investment Advisory
Representatives of NFP Securities, Inc. a Federally Registered Investment Advisor. 8/08
Closed-End Fund – A type of management company with a fixed number of shares outstanding that does not redeem shares the way a typical mutual fund does. Closed-end funds behave more like stock than open-end funds because they issue a fixed number of shares to the public in an initial public offering, after which time, shares in the fund are bought and sold on a stock exchange. The price of a share in a closed-end fund is determined entirely by market demand, so shares can either trade below their net asset value (“at a discount”) or above it (“at a premium”). Also called closed-end investment company or publicly-traded fund.
Collateral Trust Certificate – A bond issued by a corporation where the shares of a wholly-owned subsidiary are deposited with the trustee, and are the collateral backing the bond. If the issuer defaults, then the bondholders own the stock of the subsidiary company.
Obligation (CMO) – A derivative debt security collateralized by a portfolio of mortgage backed pass-through certificates. The payments from the certificates are allocated into streams of differing maturities called tranches.
Commercial Paper – An unsecured short-term money market debt instrument issued by a corporation with a maximum maturity of two (2) hundred seventy (70) days. Commercial paper is issued at a discount and matures at face value.
Commingling Funds – Mixing up customer funds and securities with broker-dealer funds and securities. This is prohibited by broker-dealers and investment advisors.
Commodity – A physical substance, such as food, grains, and metals, which is interchangeable with another product of the same type, and which investors buy or sell, usually through futures contracts. The price of the commodity is subject to supply and demand. These are not defined as securities as they do not meet the basic definition of such.
Common Stock – An equity security that gives the owner the right to receive dividends, vote on company issues, and vote for the Board of Directors. The common stockholder is the last person in line whose claims are satisfies should a corporation go bankrupt.
Corporate Bond – A bond issued by a corporation. Corporate bonds often pay higher rates than government or municipal bonds, because they tend to be riskier.
Counter Cyclical Stock – A stock that moves in the opposite direction of the overall economic cycle. It rises when the economy is weakening, and falls when the economy is strengthening.
Coupon Rate – The interest rate stated on a bond, note, or other fixed income security, expressed as a percentage of the principal (face value). Also called coupon yield and nominal yield.
Coverdell Education Savings Account – Previously called an Education IRA. A type of tax-deferred investment account that allows a maximum aggregate of two (2) thousand dollars non-deductible contribution to be made for the purpose of paying for a child’s education expenses.
Credit Balance – The amount remaining in a cash account or margin account after all securities have been paid for.
Credit Risk – The risk that the issuer of a bond or preferred stock may default on interest and principal payments.
Currency(Exchange) Risk – The risk that a business’ operations or an investment’s value will be affected by changes in exchange rates due to any of a variety of factors such as government policy changes, inflation level changes, economic performance, etc.
Current Yield – The return that a dividend on a stock, or interest on a bond, provides to the security’s current market price. The formula for computing the current yield for a stock is the annual dividend divided by the stock’s current market price. For a bond, the current yield is the annual interest divided by the bond’s current market price. Also known as bond yield or dividend yield for stocks.
Cyclical Stock – A stock whose market vale and performance changes/moves directly with the phases of the business/economic cycle.