Conduct and Practices Handbook Course (CPH) Quiz 41

Balance of payments of a country includes of Balance of trade and Capital receipts and payment.

BOP for a country keeps track of all the inflows and outflows made for that country in a given time period. A negative balance of payments indicates a indicates net outflow of money

There are two basic ways in which exchange rates affect the securities market. First, changes in exchange rates directly affect the value of securities for foreign companies. Second, changes in exchange rates affect the cost for domestic businesses to do business abroad, thereby altering the value of those businesses’ securities in the market.

Market sentiment is reflected by the actual activity of the stock: rising prices signal a bullish sentiment and falling prices a bearish sentiment.

Volatility is the degree to which a security’s price has fluctuated (or will fluctuate) within a given time period, whether it has increased or decreased. Volatility can be distinguished between historical volatility (HV), which measures the changes in a security’s price over a prior time period, and implied volatility (IV), which is the estimated degree of volatility for a security’s price in the future—what various market factors imply about the security’s potential behavior. higher volatility increases the option premium

Put-call ratio is utilized to analyze market sentiment, determining whether that sentiment is bearish or bullish. Since the buyer of a put option gains the right to sell a security in the future, a higher put-call ratio generally signals a bearish market, where investors desire to sell their securities before the price drops further

The Bond Buyer and Munifacts are the two main sources of information on municipal bonds, both for new issues and for the trading market for already issued bonds.

RevDex is an index representing the average yield for twenty-five different revenue bonds, all of which have A ratings or better, with thirty years to maturity.

The Municipal Bond Index (also called the “40-Bond Index”) is an index representing the average price of forty highly traded general obligation and revenue bonds, all of which have A ratings or better, with twenty years as their average maturity.

A/D = [(close – low) – (high – close)] / (high – low) x period’s volume
Close = closing price
Low = low price
High = high price
The goal of this formula is to spot a divergence between the volume flow and the stock price, thus
Signifying that a current stock trend is about to end.

Stocks are overbought if their prices have increased beyond their true value, being unjustifiably increased by speculation or other artificial causes.

An exponential moving average (EMA) also places more weight on more recent stock prices, but uses a smoothing factor that is understood to be more efficient than the linear average in responding to stock price changes

Annual reports include financial statements (such as income statements, balance sheets, and statements of cash flows) and other statements

Current assets are a company’s most liquid assets. Current assets are one of the major considerations when determining a company’s value.

Do not increase (DNI) order – the price is not to be increased according to the amount of the cash dividend on dividend date.

When a municipality distributes funds in this order—covering operation expenses before repaying bond debts—it is called a net revenue pledge, since the municipality pledges to repay investors from net revenue.

Shares that have been issued and sold are sometimes bought back by the company. The stock that is bought back from the market and held by the company is known as treasury stock.

Date is very important of a corporation, a corporation must let the stock exchange know that it is getting ready to pay a dividend. The day it announces this is the declaration date.

Treasury notes (T-notes) are medium-term obligations issued by the United States Treasury Department of the federal government. Unlike T-bills, Treasury notes do pay interest, paying every six months

Treasury Inflation Protection Securities (TIPS) were created to attract investors by offering protection against rising inflation, which erodes the value of fixed-income securities. When inflation is rising, the interest payment paid on TIPS rises. TIPS are sold at lower interest rates than other overnment securities.

Ginnie Mae pass-throughs are mortgage-backed securities whose repayment is guaranteed by the Government National Mortgage Association (GNMA) and thus backed by the full faith and credit of the federal government.

The investors of the coupon bond will receive cash flow very soon if the interest payment is higher.

Equipment trusts are bonds issued by transportation companies backed by the assets they employ, such as trucks or airplanes.

The direct relationship between interest rate change and price change is represented by Positive Duration. Small changes in interest rates can have a huge impact on zero-coupon bonds (much more so than on regular bonds), since the present value of the bond is based entirely on the maturity-date payment and not on any coupon payments

Zero-coupon bonds cost much less to purchase but are extremely sensitive to changes in interest rates. Because the investors profit simply from the principal increase, these are also called:

The conversion ratio gives the number of shares a convertible bond may be converted into. It is calculated by the following formula: Conversion ratio = (par value of bond) / (conversion price of stock)

A put is the right to sell something to someone. Some bonds, usually municipal bonds, contain a put option. These are known as puttable bonds.

Pre-refunding is when the issuer sells a new set of bonds at a lower interest rate, but doesn’t call the previous issue of bonds

Crossover refunding refers to a particular way in which a municipality may issue new bonds to pay off older bonds. When the new bonds are issued, which are called refunding bonds, their proceeds are placed in an escrow account (i.e. a third-party account).

Capitalization refers to a company’s equity plus its long-term debt. There are several ratios used to calculate this from various perspectives.
debt-to-equity ratio, Bond ratio, Common-stock and preferred-stock ratio.