A – Investment Vocabulary

Accretion of a Discount:A type of portfolio accounting in which there is a straight-line accumulation of capital gains on discount notes and bonds.
Accrued Interest: The interest accumulated on a security since the issue date or since the last coupon payment. The buyer of the security pays the market price plus accrued interest.
Active Market: A securities market in which a high volume of trading activity takes place.
Advance Refunding: A treasury operation that offers owners of outstanding federal obligations the opportunity to exchange securities for longer-term issues that may bear a higher yield to maturity. Advance refunding on a municipal bond refers to the sale of a refunding issue several years prior to the issue’s first call date, with the proceeds being held in trust. Also called prerefunding.
Advancing Market: A market in which prices are generally rising.
Agent: Executes an order for or acts on behalf of someone else, the principal. The agent, whether a firm or an individual, is subject to the control of the principal and does not have title to the principal’s property. The agent may charge a fee or commission for this service.
All or None (AON): An all or none order requires that none of the order be executed unless all of it can be executed at the specified price. An AON order usually involves an offering of new securities.
American Stock Exchange: A leading securities exchange located in New York City. Also called AMEX or ASE.
Amortization: The gradual reduction of a debt by means of equal periodic payments sufficient to meet current interest charges and to pay off the debt at maturity.
Amortization of Premium: The periodic charges made against the interest received on bonds in order to offset any premium price paid for the bonds.
Arbitrage: Effecting sales and purchases simultaneously in the same or related securities to take advantage of a market inefficiency.
Arrears: Amounts, such as interest or preferred stock dividends, that are overdue.
Asked Price: See Bid and Asked.
Assessed Valuation: The valuation placed on property for the purpose of taxation. In some areas, the property is assessed below 100 percent of the market value. See Assessment Ratio.
Assessment Ratio: The ratio of the assessed value of property to the full or actual property value. Full value is the fair market value at the bid side of the market, less an allowance for sales and other expenses. The normal standard in California is of full value.
At the Market: A trading term for the buying or selling of securities at the current market price rather than at a predetermined price.
At-the-Opening Order: A trading term for an order that is to be executed at the opening of the market or not at all.
Auction Coverage: The ratio of the total bids offered in an auction to the number of accepted bids. This ratio is used to evaluate general interest in any given auction.
Authorized Capital Stock: The total amount of stock that a company is permitted to issue under its charter.
Average Life: The average holding period of a mortgage-backed security. It is calculated mathematically by weighting the time the investment is outstanding by the amount of principal returned each month.
Averaging Up or Down: The practice of purchasing the same security at various prices to arrive at a higher or lower average cost.

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.