Investor Education

Investor Glossary

Terms beginning with 'C'

Capital Gains
Gains realized from the sale of capital assets.

Certificate of Deposit
A special redeemable debt obligation issued by banks and other depository institutions.

Closed Ended Mutual Fund
A mutual fund whose fixed number of shares outstanding are traded like other shares.

Commercial Bank
Bank that offers a broad range of deposit accounts, including checking, savings, and time deposits, and extends loans to individuals and businesses. Commercial banks can be contrasted with investment banking firms, such as brokerage firms, which generally are involved in arranging for the sale of corporate or government securities.

Commercial Paper
Short-term promissory notes issued in bearer form by large corporations, with maturities ranging from 5 to 270 days. Since the notes are unsecured, the commercial papers market generally is dominated by large corporations with impeccable credit ratings.

Commissions Fees
charged by brokers for handling securities trades.

Common stock
Represents proportional ownership of an incorporated enterprise. Common stockholders are the residual claimants for assets after all holders of debt and preferred stock have received their contractual payments.

Commutation
An option given to a member to replace a series of future payments by an immediate lump sum.

Compound interest
Returns are compounded by reinvesting one period’s income to earn additional income the following period. Example: At 9% compounded annually, $100 will yield $9 for the first year. In the following year, the 9% will be applied to $109 for a return of $9.81. In the third year the principal will have grown to $118.81 (100+9+9.81) and another 9% will add about $10.62. And so on.

Coupon Rate
The stated dollar return of a fixed-income investment.

Current Yield
A bond’s coupon rate divided by its current market price or a stock’s indicated dividend rate divided by its per share price.


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