General

Calculate the Future Value of a Certificate of Deposit (CD)

A Certificate of Deposit or “CD” is a type of savings certificate in which the holder deposits some amount of money (usually a minimum of $100) for a specified period of time. CDs are offered by most banks, credit unions, and thrifts and typically require a deposit timeframe of several months to several years. [...]

How Primary and Secondary Offerings Work

A primary offering refers to the initial sale of a company’s stock usually through an underwriter or an investment bank. The revenue from the primary offering goes to the company and is used to fuel growth and expansion. In exchange for the revenue, the company must give up part of its ownership to the [...]

Measure the Trade-Off Between Risk and Return with the CAPM

The Capital Asset Pricing Model (CAPM) is used to determine the appropriate rate of return of an asset. In calculating this expected return, the CAPM accounts for both risk and the time value of money and can be used to assign a discount rate for the purpose of asset valuation. The idea behind [...]

How Do You Calculate the Value of a Bond?

A bond is essentially an ‘IOU’ set up between an investor and a company or government entity. Under the agreement, an interest rate is set and the timing of payments that the lender will receive during the life of the bond is defined. At the end of the bond’s life- its maturity- the [...]

What is the PEG Ratio and How is it Calculated?

The PEG or “Price/Earnings to Growth” ratio is a measure used to value a stock based on the trade-off between the P/E ratio of the stock and the company’s forecasted growth. Made popular by Peter Lynch in his book “One Up on Wall Street”, the PEG ratio is closely tracked by many investors to [...]

What is an American Depositary Receipt (ADR)?

An American Depositary Receipt of “ADR” is a certificate that represents one or more shares (or a fraction of a share) in a foreign stock. Usually, when stocks of foreign companies trade in the U.S. markets, they are traded as American Depositary Receipts. ADRs trade in U.S. dollars with the underlying security held [...]

What is a “Pump and Dump” Scheme?

A pump and dump scheme is a form of stock fraud in which the perpetrators seek to artificially inflate the price of a stock in which they already have a position in order to profit. Typically, the stocks used in a pump and dump scheme are microcap or penny stock companies as the prices [...]

The Impact of the Ex-Dividend Date on Stock Trading

Ex-dividend (abbreviated as xd or ex-div) is a share classification to signify that a declared dividend will go to the seller rather than the buyer. The ex-dividend date represents the first date that the buyer is not entitled to a declared dividend. Before this date, the stock is traded under the classification of [...]

Liquidity Risk in Stock Investing

Liquidity risk is the risk that a given security cannot be sold in a timely manner to avoid a significant loss or make a desired profit. For these reasons, liquidity risk represents financial risk. Securities that are lightly traded are often referred to as “illiquid” and will generally have higher bid-ask spreads than securities [...]

The Bid, Ask, and Spread in Stock Investing

Unlike most other markets, the stock market has the unique aspect of having both the buyer and seller set prices. The bid price is the price the buyer states they will pay for the stock while the ask price is the price the seller is asking for the stock. The role of the [...]