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Meaning / Definition of

Common Shares

Categories: Stocks,

Securities representing equity ownership in a corporation, providing voting rights, and entitling the holder to a share of the company's success throughdividends and/or capital appreciation. In the event of liquidation, common shareholders have rights to a company's assets only after bondholders, other debt holders, and preferred shareholders have been satisfied. Typically, common shareholders receive one vote per share to elect the company's board of directors (although the number of votes is not always directly proportional to the number of shares owned). The board of directors is the group of individuals that represents the owners of the corporation and oversees major decisions for the company. common shareholders also receive voting rights regarding other company matters such as stock splits and company objectives. In addition to voting rights, common shareholders sometimes enjoy what are called "preemptive rights". preemptive rights allow common shareholders>to maintain their proportional ownership in the company in the event that the company issues another offering of stock. This means that common shareholders with preemptive rights have the right but not the obligation to purchase as many new shares of the stock as it would take to maintain their proportional ownership in the company. also called junior equity or common stock.

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Definition / Meaning of

Inflation-adjusted Principal

Categories: Bonds and Treasuries,

The net worth of a principal amount used to buy inflation-adjusted securities, taking into account any inflation that takes place till the maturity date. The new value of the principal is derived by multiplying the original principal amount by the inflation index ratio.P(adj) = P(ori) x ( CPI(cur) / CPI(ref) )Where, P(adj) = the net worth of the principal value after inflation adjustment; P(ori) = the original amount of principal used to buy the security ; CPI(ref) = the inflation level at the time the bond is first issued (usually taken from 3 months before the bond is issued) ; CPI(cur) = the inflation level at the current period of the bond maturityFor example, an investor buys a $2,000 Treasury inflation-adjusted bond in June. The CPI reference rate is taken from March's CPI (three months earlier), which is, for example, 100. Six months later, inflation has risen 1% and the current CPI is now 101. This will yield an inflation index ratio of 101/100, or 1.01. At the end of six months, the bond's adjusted principal is now worth $2,020, or 2,000 x 1.01.

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