About This Chapter
Types of Underlying Securities - Chapter Summary
While going through these lessons on different types of underlying securities, you can enrich your understanding of packaged retail investments and bankers' acceptance. Our professional instructors also teach you about the advantages of preferred stock and how to calculate shareholder earnings. After reviewing the lessons, you should be ready to:
- Explain why companies issue stock
- Recall various types of preferred stock
- Outline how institutions use debt securities
- Recount variations of option contracts
- Discuss different types of government securities
- Provide an overview of municipal bonds
- List disadvantages of commercial paper
- Relate why a certificate of deposit is beneficial
Mobile-friendly and developed by experts, these lessons on types of underlying securities can help you easily grasp the concepts presented. To make sure you fully understand what you've studied, we provide a short quiz for each lesson. If you're someone that likes to review information offline, simply print the quizzes in worksheet form.
1. Common Stock: Definition, Issuance & Formula
This lesson will provide you with a basic understanding of common stock, why and how companies issue stock, the potential for return on investment when investing, and how to calculate shareholder earnings.
2. What is Preferred Stock? - Definition, Types & Advantages
This lesson will define the hybrid investment security called preferred stock. The various types of preferred stocks will be explained and advantages of each will be explored.
3. Debt Securities: Definition & Examples
While they all share similar attributes, debt securities vary by the type of institution that creates the security. In this lesson we will review how institutions use debt securities to finance operational activities.
4. Options Basics: Stocks, Payoffs & Puts & Calls
Many people believe the financial markets are limited to buying and selling shares of stock. But, in addition to stock, there are other financial instruments. In this lesson, we'll learn about option contracts - one such variation of stock shares.
5. Government Securities: Definition, Types & Examples
Governments need money to operate and, just like people and businesses, they will borrow money when needed. In this lesson, you'll learn about government securities.
6. State & Local Government Securities: Definition & Types
In this lesson, we'll discuss municipal bonds, types of state and local government securities. These bonds can be grouped into one of two 'buckets,' either tax-backed (general obligation bonds) or revenue-backed (revenue bonds).
7. Commercial Paper: Definition, Advantages & Disadvantages
A great way for companies with high credit ratings to raise short term cash for operating purposes is through commercial paper. Most large public companies issue commercial paper.
8. Certificate of Deposit: Definition, Advantages & Disadvantages
One of the advantages of being financially wise and having a savings account or funds to invest is that you can make your money work for you by earning interest. In this lesson we'll learn about one investment - a certificate of deposit.
9. Banker's Acceptance: Definition, Advantages & Disadvantages
To minimize risk, the vendor may request a banker's acceptance from a new business to cover the cost of products. This is like a post-dated check that is debited from the company's account on a specific date.
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Other chapters within the Series 6 Exam: Study Guide & Practice course
- Financial Advertising & Communications With the Public
- Describing Investment Products & Services
- Disclosing Financial Account Types & Restrictions
- Understanding Retirement Plans & Tax Advantaged Accounts
- Obtaining Basic Customer Information & Documentation
- Obtaining Customer Investment Profile Information
- Obtaining Supervisory Approvals for Investment Accounts
- Analyzing Investment Portfolios & Financial Statements
- Understanding Funds, Trusts & Investment Companies
- Understanding Municipal Fund Securities
- Variable Life Insurance & Annuity Contracts
- Tax Treatment of Investment Profiles
- Disclosing Investment Product Information
- Updating Investment Customers & Retaining Customer Records
- Processing & Confirming Financial Transactions
- Resolving Investment Disputes & Customer Complaints