CEF 251 Exam 2 (ch. 11-21)

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

short selling (shorting)

a process by which investors sell a stock that they do not own

margin call

a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level

Employee Stock Ownership Plan (ESOP)

a retirement plan in which the employer contributes some of its own stock to the employee's retirement account

Traditional Individual Retirement Account (IRA)

a retirement plan that enables individuals to invest $5,000 per year ($10,000 per year for married couples)

deductible

a set dollar amount that you are responsible for paying before any coverage is provided by your insurer

lump-sum settlement

a single payment of all the benefits owed to a beneficiary under a life insurance policy

letter of last instruction

a supplement to a will that can describe your preferences regarding funeral arrangements and indicate where you have stored any key financial documents

umbrella personal liability policy

a supplement to auto and homeowner's insurance that provides additional personal liability coverage

standard family trust (credit-shelter trust)

a trust established for children in a family

living trust

a trust in which you assign the management of your assets to a trustee while you are living

variable annuity

annuity in which the return is based on the performance of the selected investment vehicles

fixed annuity

annuity that provides a specified return on your investment so you know how much you will be receiving at a future point in time

traditional marital share will

a will suitable for larger estates that distributes half of the estate to the spouse and the other half to any children or to a trust

simple will

a will suitable for smaller estates that specifies that the entire estate be distributed to the person's spouse

Flexible Spending Account (FSA)

account established by the employer for the employee to use pre-tax income to pay for medical expenses

Health Savings Account (HSA)

account that shelters income from taxes and that can be used to pay health care expenses

estate

assets of a deceased person after all debts are paid

personal property floater

extension of the homeowner's insurance policy that allows you to itemize your valuables

stock exchanges

facilities that allow investors to purchase or sell existing stocks

common stock

financial instrument used by a firm to raise funds; represents partial ownership in the firm

Balance Sheet

financial statement that indicates a firm's sources of funds and how it has invested its funds as of a particular point in time

par value

for a bond, its face value, or the amount returned to the investor at the maturity date when the bond is due

waiting period

from the time you are disabled until you begin to receive benefits

no-load mutual funds

funds that sell directly to investors and do not charge a fee

open-end mutual funds

funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them

bond mutual funds

funds that sell shares to individuals and invest the proceeds in bonds

stock mutual funds

funds that sell shares to individuals and invest the proceeds in stocks

closed-end funds

funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges

load mutual funds

funds whose shares are sold by a stockbroker who charges a fee for the transaction

living benefits

allows policyholder to receive a portion of death benefits before they die

conversion option

allows you to convert your term insurance policy into a whole life policy that will be in effect the rest of your life

limited payment policy

allows you to pay premiums over a specified period but remain insured for life

nonforfeiture clause

allows you to receive the savings you accumulated if you terminate your whole life policy

renewability option

allows you to renew your policy for another term once an existing policy expires

premium

amount by which a closed-end fund's share price in the secondary market is above the fund's NAV

liability

amount you may have to pay to others for damage you caused them or their property

Roth 401(k) plan

an alternative to a 401(k) account available to people employed by participating companies

mutual fund supermarket

an arrangement offered by some brokerage firms that enables investors to diversify among various mutual funds (from different mutual fund families) and to receive a summary statement for these funds on a consolidated basis

Rollover IRA

an individual retirement account into which you can transfer your assets from your company retirement plan tax-free while avoiding early withdrawal penalties

buy stop order

an order to buy a stock when the price rises to a specified level

market order

an order to buy or sell a stock at its prevailing market price

limit order

an order to buy or sell a stock only if the price is within the limits that you specify

stop order

an order to execute a transaction when the stock price reaches a specified level; a special form of limit order

sell stop order

an order to sell a stock when the price falls to a specified level

defined-benefit plan

guaranteed a specific amount of income when you retire based on your salary and years of employment

vested

having a claim to a portion of the money in an employer-sponsored retirement account that has been reserved for you on your retirement even if you leave the company

underwriters

hired to calculate risk and decide what policies to offer and premiums to charge

investment objective

in a prospectus, a brief statement about the general goal of the mutual fund

investment strategy

in a prospectus, a summary of the types of securities that are purchased by the mutual fund in order to achieve its objective

inflation

increase in the general level of prices

institutional investors

individuals who invest funds in securities

Medigap insurance

insurance provided by private insurance companies to cover medical expenses that are not covered by Medicare

passive strategy

investing in a diversified portfolio of bonds that are held for a long period of time

maturity matching strategy

investing in bonds that will generate payments to match future expenses

day traders

investors who buy stocks and then sell them on the same day

living will

legal document in which individuals specify their preferences if they become mentally or physically disabled

trust

legal document in which the grantor transfers assets to the trustee who manages them for designated beneficiaries

will

legal request for how your estate should be distributed on your death

odd lot

less than 100 shares of stock

term insurance

life insurance provided over a specified time period and does not build cash value

mortgage life insurance

life insurance that pays off a mortgage in the event of the policyholder's death

whole life insurance

life insurance that provides benefits to the beneficiary and also accumulates a cash value.

hedge funds

limited partnerships that manage portfolios of funds for wealthy individuals and financial institutions

Federal Agency Bonds

long-term debt securities issued by federal agencies

bonds

long-term debt securities issued by government agencies or corporations

corporate bonds

long-term debt securities issued by large firms

municipal bonds

long-term debt securities issued by state and local government agencies

treasury bonds

long-term debt securities issued by the U.S. Treasury

secondary market

market in which existing securities are traded

primary market

market where newly issues securities are traded

fiscal policy

means by which the gov imposes taxes on individuals and corporations and by which it spends its money

replacement policy

pays you for the cost of replacing the damaged property

cash value policy

pays you for the value of the damaged property after considering depreciation

probationary period

period from the time your disability income is approved until your coverage goes into effect

executor

person designated to execute the terms of a will

beneficiary

person named to receive the benefits of an insurance policy

monetary policy

policy established by the federal reserve to adjust the supply of funds in the financial system in order to influence interest rates

round lot

shares bought or sold in multiples of 100

defined-contribution plan

specifies guidelines under which you and/or your employer can contribute to your retirement account and that allows you to invest the funds as you wish

growth stocks

stocks of firms with substantial growth opportunities

income stocks

stocks that provide investors with periodic income in the form of large dividends

Group Term Insurance

term insurance with generally lower than typical premiums that is available to people within a defined group

estate planning

the act of planning for how your wealth will be allocated on or before your death

settlement options

the alternative ways a beneficiary can receive life insurance benefits in the event that the insured person dies

discount

the amount by which a closed-end fund's share price in the secondary market is below the fund's NAV

expense ratio

the annual expenses per share divided by the net asset value of a mutual fund

yield to maturity

the annualized return on a bond if it is held until maturity

decreasing-term insurance

the benefits that will be paid to the beneficiary are reduced over time and the premium remains constant

premium

the cost of obtaining insurance

risk premium

the extra yield required by investors to compensate for the risk of default

Net Asset Value (NAV)

the market value of the securities that a mutual fund has purchased - any liabilities owed

installment payments settlement

the payment of life insurance benefits owed to a beneficiary as a stream of equal payments over a specified number of years

beneficiaries

the persons specified in a will to receive a part of an estate

asset allocation

the process of allocating money across financial assets with the objective of achieving a desired return while maintaining risk of a tolerable level

trustee

a person or institution named to manage assets on behalf of the beneficiaries

risk

exposure to events that can cause financial loss

portfolio

set of multiple investments in different assets

One-participant 401(k) plan

A 401(k) plan for self-employed individuals, subject to the same rules and contribution limits as 401(k) plans for employees

403(b) plan

A defined contribution plan that allows employees of nonprofit organization's to invest up to $18,000 of their income on a tax-deferred basis

annuity

A financial contract that provides annual payments over a specified period

keogh plan

A retirement plan that enables high income self-employed individuals to contribute part of their pretax income to a retirement account

Testamentary Trust

A trust created by will.

Mortgage REITs

REITs that invest in mortgage loans that help to finance the development of properties

Equity REITs

REITs that invest money directly in properties

Income Method

a method that determines how much life insurance is needed based on the policyholder's annual income

grantor

Person who creates a trust

Ticker Symbol

The abbreviated term that is used to identify a stock for trading purposes

interest payments settlement

a method of paying life insurance benefits in which the company retains the amount owed for a specified number of years and pays interest to the beneficiary

Initial Public Offering (IPO)

The first public offering of a firm's stock to the public

convertible bond

a bond that can be converted into a stated number of shares of the issuer's stock if the stock price reaches a specified price

Discount Brokerage Firm

a brokerage firm that executes your desired transactions but does not offer investment advice

Full-service brokerage firm

a brokerage firm that offers investment advice and executes transactions

profit sharing

a defined-contribution plan in which the employer makes contributions to employee retirement accounts based on a specified profit formula

401(k) plan

a defined-contribution plan that allows employees to contribute a maximum of $17,000 ($22,500 if they are age 50 or older) per year on a pre-tax basis

prospectus

a document that provides financial information about a mutual fund, including expenses and past performance

codicil

a document that specifies changes in an existing will

call feature

a feature on a bond that allows the issuer to repurchase the bond from the investor before maturity

surrender charge

a fee that may be imposed on any money withdrawn from an annuity

income statement

a financial statement that measures a firm's revenues, expenses, and earnings over a particular period of time

family

a group of separately managed open-end mutual funds held by one investment company

power of attorney

a legal document authorizing someone to act on your behalf in the event you are incapable

durable power of attorney for health care

a legal document that appoints someone to make the medical decisions for a person in the event he or she becomes unable to do so

probate

a legal process that declares a will valid and ensures the orderly distribution of assets

revocable living trust

a living trust that can be dissolved

irrevocable living trust

a living trust that cannot be changed, although it can provide income to the grantor

economic growth

a measure of growth in a country's economy over a particular period

Consumer Price Index (CPI)

a measure of inflation that represents prices of consumer products such as groceries, household products, housing and gasoline

Producer Price Index (PPI)

a measure of inflation that represents prices of products used to produce other products, such as coal, lumber, and metals

high-yield (junk) bonds

bonds issued by smaller, less stable corporations that are subject to a higher degree of default risk

electronic communications networks (ECNs)

computer systems that match desired purchases and sales of stocks

interstate

condition of dying without a will

insurance policy

contract between insurance and policyholder

long-term care insurance

covers expenses associated with long term health conditions that cause individuals to need help with everyday tasks

Renters Insurance

covers your possessions within a house, condo, or apartment you are renting

risk management

decisions about whether and how to protect against risk

SIMPLE (Savings Incentive Match Plan for Employees) Plan

defined contribution plan intended for firms with 100 or fewer employees

Simplified Employee Pension (SEP) plan

defined contribution plan set up by business owners for themselves and their employees; commonly offered by firms with 1-10 employees or self-employed people

Standard Deviation (SD)

degree of volatility in the stock's returns over time

Exchange Traded Fund (ETF)

designed to mimic particular stock indexes (like index funds) but are traded on a stock exchange like closed-end funds, and their share price changes throughout the day

home inventory

detailed information about your personal property that can be used when filing a claim

Budget (Needs) Method

determines how much life insurance is needed based on future expenses of the household

no-fault programs

do not hold a specific driver liable for causing an accident

over-the-counter (OTC) market

electronic communications network that allows investors to buy or sell securities

preferred stock

entitles shareholders first priority to receive dividends

index bond funds

mutual funds that are intended to mimic performance of a specified bond index

index funds

mutual funds that attempt to mirror the movements of an existing stock index

balanced growth and income funds

mutual funds that contain both growth stocks and stocks that pay high dividends

sector funds

mutual funds that focus on a specific industry or sector, such as technology stocks

corporate bond funds

mutual funds that focus on bonds issued by high-quality firms that tend to have a low degree of default risk

international bond funds

mutual funds that focus on bonds issued by non-U.S. firms or governments

international stock funds

mutual funds that focus on firms that are based outside the U.S.

equity income funds

mutual funds that focus on firms that pay a high level of dividends

treasury bond funds

mutual funds that focus on investment in Treasury bonds

midsize capitalization (mid-cap) funds

mutual funds that focus on medium-size firms

high-yield (junk) bonds

mutual funds that focus on relatively risky bonds issued by firms that are subject to default risk

Small capitalization (small-cap) funds

mutual funds that focus on relatively small firms

technology funds

mutual funds that focus on stocks of technology-based firms and therefore represent a particular type of sector fund

capital appreciation funds

mutual funds that focus on stocks that are expected to grow at a very high rate

growth funds

mutual funds that focus on stocks that have potential for above-average growth

ginnie mae funds

mutual funds that invest in bonds issued by the Government National Mortgage Association

global bond funds

mutual funds that invest in foreign bonds as well as U.S. bonds

municipal bond funds

mutual funds that invest in municipal bonds

socially responsible stock funds

mutual funds that screen out firms viewed by some as offensive

stock option

option to purchase or sell stocks under specified conditions

exercise (strike) price

price at which a stock option is exercised

disability income insurance

provides income to policyholders in the event they become disabled

Universal Life Insurance

provides insurance over a specified term and accumulates savings for the policy holder over this time

Variable Life Insurance

provides insurance over a specified term and allows policyholders to invest residual funds, after the premium is paid, in various investment types

life insurance

provides payment to a specified beneficiary when the policyholder dies

call option

provides the right to purchase 100 shares of a specified stock at a specified price by a specified expiration date

put option

provides the right to sell 100 shares of a specified stock at a specified price by a specified expiration date

on margin

purchasing a stock with a portion of the funds borrowed from a brokerage firm

insurance agent

recommends insurance policies to customers

independent insurance agent

represents many different insurance companies

Roth IRA

retirement plan that enables individuals who are under specific income limits to invest a max amt per year

range of returns

returns of a specific investment over a given period

exchange rate risk

risk realized when the value of a bond drops because the currency denominating the bond weakens against the dollar

default risk

risk that the borrower of funds will not repay the creditors

publicly traded stock indexes

securities whose values move in tandem with a particular stock index representing a set of stocks

interest rate strategy

selecting bonds for investment based on interest rate expectations

Covered Call Strategy

selling call options on stock that you own

interest rate risk

the risk that a bond's price will decline in response to an increase in interest rates

call (prepayment) risk

the risk that a callable bond will be redeemed by the issuer

market risk

the susceptibility of a mutual fund's performance to general stock market conditions

Gross Domestic Product (GDP)

the total market value of all goods and services produced in a country

Fundamental Analysis

the valuation of stocks based on an examination of fundamental characteristics such as revenue or earnings, or the sensitivity of the firm's performance to economic conditions

Technical Analysis

the valuation of stocks based on historical price patterns

floor traders

traders at a stock exchange who execute trades to fulfill orders placed by other investors

market makers

traders who execute trades on the OTC market and earn commissions in the form of a bid-ask spread

specialists

traders who help to create a market in one or more stocks by taking an opposite position to the orders placed by clients

Real Estate Investment Trust (REIT)

trusts that pool investments from individuals and use the proceeds to invest in real estate

captive (exclusive) insurance agent

works for one particular insurance company


Ensembles d'études connexes

IT195 Customer Service Skills for the Service Desk Professional - Chapter 1 - NO TRUE/FALSE

View Set

PrepU CH 36: Management of Patients with Musculoskeletal Disorders

View Set

Chapter 21: Complications Occurring Before Labor and Delivery: PREPU

View Set

Chapter 4: Project Integration Management

View Set

MENTAL HEALTH CHAPTERS 1,2,9, & 27 (Halter)

View Set

how to find area and perimeter of shapes

View Set

Case Study 3: Chapter 19 - e2 Kickstarter Project

View Set