Investor Education

Obligations issued by a state or municipality whose interest payments (but not profits from purchase and sale) are exempted from federal taxation. The interest payment may be exempted from local taxation, too, if purchased by a state resident. (See "General Obligation (GO) Bond," "Revenue Bond.")

The interest rate that must be received on a taxable security to provide the holder the same after-tax return as that earned on a tax-exempt security. Because interest earned on municipal securities is not subject to federal income taxation, a tax-exempt security does not have to yield to a holder as much as a taxable security to produce an equivalent after-tax yield. This differential is attributable to the effect of the tax liability incurred by the holder if it held a taxable security. The taxable equivalent yield varies according to the holder's marginal federal income tax bracket, and, where applicable, any state or local tax liability as well. The formula for determining the taxable equivalent yield is:

Taxable Equivalent Yield = [tax-free yield/ (100-tax rate)] x 100. *

A form of ownership held by at least two persons. Each owner has a specific percentage interest in the account and, upon death of one of the owners; the share becomes part of the estate. (See "Joint Tenants with Right of Survivorship.")

An agent of a corporation responsible for the registration of shareowners' names on the company records and the proper re-registration of new owners when a transfer of stock occurs.

A marketable U.S. government debt security with a maturity of less than one year. Treasury bills are issued at a discount from par; there is no fixed interest rate.

A marketable U.S. government fixed-interest debt security with a maturity of more than ten years.

A marketable U.S. government fixed-interest debt security with a maturity of between one and ten years.

Shares of stock reacquired by the corporation through purchase or donation, which are not used for dividend, voting, or earnings calculation purposes.