C – Investment Vocabulary

C

Call:An option to buy a specific asset at a certain price within a certain period of time.
Callable: A bond or preferred stock that may be redeemed by the issuer before maturity for a call price specified at the time of issuance.
Call Date: The date before maturity on which a bond may be redeemed at the option of the issuer.
Called Bonds: Bonds redeemed before maturity.
Call Loans: Loans that may be terminated at the discretion of the borrower or the lender.
Call Money: Money loaned to brokers by banks and subject to call at the discretion of the lender. See Call Loans.
Call Premium: The excess paid for a bond or security over its face value.
Call Price: The price paid for a security when it is called. The call price is equal to the face value of the security plus the call premium, if any.
Call Provision: The details by which a bond may be redeemed by the issuer, in whole or in part, prior to maturity. A security with such a provision will usually have a higher interest rate than comparable noncallable securities.
Capital Gain/Loss: The amount that is made or lost, depending upon the difference between the sale price and the purchase price of any capital asset or security.
Capital Market: The market in which buyers and sellers, including institutions, banks, governments, corporations, and individuals, trade debt and equity securities.
Carry: The cost incurred in interest charges for financing and holding a securities inventory.
See Positive Carry; Negative Carry.
Cash Sale: A transaction calling for the delivery and payment of the securities on the same day that the transaction takes place.
Circle: Indicating an interest in a specified amount of bonds by making a nonbinding commitment to buy the issue; may become a final sale that is binding to both parties.
Clear: To carry out a trade: the seller delivers securities, and the buyer delivers funds. A trade that does not clear is said to fail. Clearing House Funds: Monies within the New York Clearing House Interbank Payments System. Funds are transferred from bank to bank to allow settlement in the various areas served by a particular clearing house. Clearing house funds are available the next day.
CMO Class: A group of bonds within a collateralized mortgaged obligation (CMO) issue. Each class has a specific rate and principal-redemption schedule. Also referred to as a tranche.
Collateral: Securities or other property that a borrower pledges as security for the repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
Collateral Note: A promissory note that specifically mentions the collateral pledged by the borrower as security for the repayment of a loan or other obligation.
Collateral Trust Bonds: Bonds secured by a lien on specified securities pledged as collateral and held by a trustee as collateral. Commercial Paper: Short-term, unsecured, negotiable promissory notes issued by businesses.
Commission: Broker’s or agent’s fee for purchasing or selling securities for a client.
Consolidated Debt: A debt in which all of the separate entities of an organization are equally responsible for repayment of the debt.
Convertible: A feature of certain bonds, debentures, or preferred stocks that allows them to be exchanged for another class of securities. A convertible bond contains a provision that permits conversion to the issuer’s common stock at some fixed exchange ratio.
Cornering the Market: Buying securities on a scale large enough to give a buyer control over the market price. This practice is illegal.
Correspondent: A bank, securities firm, or other financial organization that regularly performs services for another in a market to which the other does not have direct access.
Correspondent Bank: A bank that is the depository for another bank. The correspondent bank accepts all deposits in the form of cash letters, and collects items for its bank depositor. The depository bank will render all banking services to its correspondent in the region in which the depository bank is located.
Coupon Rate: The annual rate of interest that the issuer of a bond promises to pay to the holder of the bond.
Coupons: Certificates attached to a bond that indicate the interest due on a payment date. The coupons are detached as they come due (usually semiannually) and are presented for payment of interest. The term Coupon also refers to the rate of interest the issuer promises to pay the issue holder.
Coupon Yield: The annual interest rate of a bond, divided by the bond’s face value and stated as a percentage. This usually is not equal to the bond’s current yield or its yield to maturity.
Covenant: A pledge on the part of an issuer of a security to perform in a way that may benefit the security holders or to refrain from doing something that might be disadvantageous to them.
Cover: The spread between the winning bid/ offer and the next highest bid/next lowest offer. It is useful as a basis for evaluation of the bids.
Coverage Ratio: The ratio of income available to pay a specific obligation versus the total amount obligated. This is a measure of a firm’s financial stability.
Covering: Buying back a security previously sold short, in order to eliminate one’s short position (see Short Sale). Also refers to the rate of return on a bondholder’s investment.
Credit Analysis: A critical review and appraisal of the economic and financial condition of a government agency or corporation. Evaluates the issuing entity’s ability to meet its debt obligations, and the suitability of such obligations underwriting or investment.
Current Maturity: The amount of time left until an obligation matures. For example, a oneyear bill issued nine months ago has a current maturity of three months.
Current Yield: The coupon payments on a security as a percentage of the security’s market price. In many instances the price should be gross of accrued interest, particularly on instruments where no coupon is left to be paid until maturity.
CUSIP: The Committee on Uniform Security Identification Procedures, which was established under the auspices of the American Bankers Association to develop a uniform method of identifying municipal, U.S. government, and corporate securities.

Disclaimer
Although the information in this brochure has been obtained from sources Bank of America believes to be reliable, we do not guarantee its accuracy or completeness, and such information may be summarized or condensed. This brochure is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.