Core securities and investment terms tested on the Series 7 exam.
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- What is common stock?
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An equity security representing partial ownership in a corporation, with voting rights and claims on residual earnings after debt and preferred shareholders.- What is preferred stock?
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An equity security with a fixed dividend rate, senior claim on assets over common stockholders, but typically no voting rights.- What is a bond?
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A debt security representing a loan to an issuer, paid back at par value on maturity with periodic interest payments.- What is a coupon rate?
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The annual interest rate paid on a bond's face value, stated as a percentage and fixed at issuance.- What is yield to maturity (YTM)?
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The total return an investor receives if a bond is held until maturity, accounting for current price, coupon rate, and time to maturity.- What is duration?
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A measure of a bond's sensitivity to interest rate changes, expressed in years, calculating the weighted average time to receive cash flows.- What is a call feature on a bond?
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The issuer's right to repay a bond before maturity at a specified call price, typically when interest rates fall.- What is a put feature on a bond?
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The bondholder's right to force the issuer to repurchase the bond at a set price before maturity, typically when interest rates rise.- What is a convertible bond?
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A bond that gives the holder the right to convert it into a specified number of shares of common stock at a predetermined price.- What is a warrant?
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A security giving the holder the right to purchase a specified number of common shares at a predetermined price for a set period.- What is an ADR (American Depositary Receipt)?
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A certificate representing shares in a foreign company, denominated in US dollars and traded on US exchanges.- What is a mutual fund?
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An investment company pooling money from investors to buy a diversified portfolio of securities managed by professionals.- What is an open-end fund?
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A mutual fund that continuously issues and redeems shares at net asset value (NAV), with unlimited shares available.- What is a closed-end fund?
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A mutual fund that issues a fixed number of shares in an initial public offering, then trades on exchanges like a stock.- What is an ETF (Exchange Traded Fund)?
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A fund holding a basket of securities that trades on an exchange like a stock, typically with low expense ratios and tax efficiency.
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