Personal Finance Test Chapter 14, 15, 17, 19, 20
market order
an order to execute a transaction to buy or sell a stock at its prevailing market price
limit order
an order to execute a transaction to buy or sell a stock only if the price is within the limits you will specify
stop order
an order to execute a transaction when the stock price reaches a specified level, a special form of limit order
risk from investing
returns are uncertain, exposure to the economy (market risk). Future values of investments are dependent on demand by investors
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
publicly traded indexes
securities whose value move in tandem with a particular stock index representing a set of stocks one of the most popular is the standard and poor depository receipt (SPIDER)
round lot
shares bought or sold in multiples of 100
fundamental analysis
the valuation of stocks based on an examination of fundamental characteristics such as revenue or earnings or the sensitivity of the firms performance to economic conditions
technical analysis
the valuation of stocks based on historical price patterns
floor trader
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
roth IRA
a retirement plan that enables individuals who are under specific income limits to invest 5000 per year, 10000 for married couples
Keogh plan
a retirement plan that enables self-employed individuals to contribute part of their pre-tax income to a retirement account
investment strategy
a summary of the types of securities that are purchased by the mutual fund in order to achieve its objective
traditional martial 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 to be distributed to the persons spouse
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
over the counter market (OTC)
an electronic communications network that allows investors to buy or sell securities
buy stop order
an order for a brokerage firm to buy a stock when the price rises to a specified level
sell stop order
an order for a brokerage firm to sell a stock when the price falls to a specified level
return risk for estate
-renters could default -property value could decline
monetary policy
-stocks perform better when interest rates are low - some stocks are more sensitive to interest rates than others -the federal reserve uses monetary policy to influence rates
most popular organized exchange on US
New York Stock Exchange
income statement
a financial statement that measures a firms revenue ,expenses and earnings over a particular period of time
family
a group of separately managed open-end mutual funds held by one investment company
rollover IRA
a individual retirement account into which you can transfer your assets from your company retirement plan tax-free while avoiding early withdrawal penalties
probate
a legal process that declares a will valid and ensures the orderly distribution of assets
economic growth
a measure of growth in a country economy over a particular period
proder price index (PPI)
a measure of inflation that represents prices of products used to produce other products
consumer prive index (CPI)
a measure of inflation that represents prices of various consumer products
balance stocks fund
a middle ground including income and growth stocks
employer stock ownership plan
a retirement plan in which the employer contributes some of its own stock to the employees retirement account
traditional individual retirement account
a retirement plan that enables individuals to invest 5000 per year, 10,000 for married couples
defined contribution plan
a employer sponsored retirement plan that specifies guidelines under which you and your employer can contribute to your retirement account and that allows you to invest the funds as you wish
surrender charge
a fee that may be imposed on any money withdrawn from an annuity
balance sheet
a financial statement that indicates a firms success of funds and how it has invested its funds as of a particular point in time
discount brokerage firm
a brokerage form that executes your desired transactions but does not offer investment advice
preferred stock
a certificate issued by a firm to raise funds that entitles share-holders to first priority to receive dividends (less risky that common stock) -Carries no voting rights -a hybrid, a stock but acts like a bond because you are getting regular income payments on it
common stock
a certofeicate issued by a firm to raise funds that represents partial ownership in the firm
403 b plan
a defined contribution plan allowing employees of nonprofit organizations to invest up to 17,000 of their income on a tax-differed basis
simplified pension plan
a defined contribution plan commonly offered by firms with 1 to 10 employees or used by self-employed people
simplified employees pension
a defined contribution plan commonly offered by firms with 1-10 employees or used by self-employed people
401 K plan
a defined contribution plan that allows employees to contribute a maximum of 17,000 per year on a pre-tax basis
profit sharing
a definite contribution plan in which the employer makes contributions to employee retirement accounts based on a specified profit formula
SIMPLE
a definite contribution plan intended for firms with 100 or fewer employees
prospectus
a document that provides financial information about a mutual fund, including expenses and past performances
codicil
a document that specifies changes in a existing will
defined-benefit plan
a employer sponsored retirement plan that guarantees you a specific amount of income when you retire based on your salary and years of employment
real estate (type of investments)
buying a home or purchasing rental property or land return from investing in real estate comes in form of rent payments and selling the property for a higher price than paid for it
_____- mutual funds sell shares to investors but do not repurchase them; instead funds shares are purchased and sold on stock exchanges
closed-end
electronic communications networks (ECN)
computer systems that match up desired purchases and sales of stocks -allows for after-hours trading
interest payments also known as...
coupon payments
three ways to make money on mutual funds
dividende distributions capital gains distributions capital gains from redeeming shares
dividend distributions
dividends received on stocks in the funds are distributed to shareholders
income funds
emphasis on income i.e bonds and stocks paying dividends
portfolio managers
employees of financial institutions who make investment decisions
stock exchange
facilities allow investors to purchase or sell existing stocks
interest rate risk
for a bond mutual fund, its susceptibility to interest rate movements
analysis of the firm
fundamental analysis, economic analysis and technical analysis
exchange traded funds ETF's
funds that are designed to mimi particular stock indexes but they are traded on a stock exchange just like closed-end funds and their share price changes throughout the day
no-load mutual fund
funds that sell directly to investors and do not charge a fee
no-load mutual funds
funds that sell directly to investors and do not charge a fee
open end mutual fund
funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them
open-end mutual funds
funds that sell shares directly to investors and repurchase those shares whenever investors wish to sell them usually managed by investment companies that are subsidiaries of a large financial conglomerate
bond mutual funds
funds that sell shares to individuals and invest in the proceeds in bonds
stock mutual funds
funds that sell shares to individuals and invest the proceeds in stocks
close-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 (or load) for the transportation -loads can have significant impact on their investment performance
vested
having a claim to a portion of money in a employer sponsored retirement account that has been reserved for you upon your retirement even if you leave the company
small firms tend to have a more growth potential but a ____ risk
higher
capital gains from redeeming shares
if price received at redemption exceed price paid
investment objectives
in a prospectus, a brief statement about the general goal of the mutual fund
individual investors
individuals who invest a portion of their own money
day traders
investors who buy stocks and then sell them on the same day
economic analysis of stocks
involves assessing national and international economic conditions that can affect a firms or its industry's stock price -is economy growing? - fiscal policy -monetary policy
odd lot
less than 100 shares of stock
hedge funds
limited partnerships that manage portfolios of funds for wealthy individuals and financial institutions
balance funds
mix of dividend stocks, bonds AND growth stocks
index bond funds
mutual funds that are intend to mimic the 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
international bond funds
mutual funds that focus on bonds issued by US firms or governments
corporate bond funds
mutual funds that focus on bonds issued by high qualify firms that tend to have a low degree of default risk
international stock funds
mutual funds that focus on firms that are based outside the U.S
international stock funds
mutual funds that focus on firms that are based outside the US
mid-size capitalization (mid-cap) funds
mutual funds that focus on firms that are medium
small capitalization (small-cap) funds
mutual funds that focus on firms that are relatively small
equity income funds
mutual funds that focus on firms that pay a high level of dividends
treasury bond funds
mutual funds that focus on investments in treasury bonds
high yield junk bond funds
mutual funds that focus on relatively risky bonds issued by firms that are subject to default risk
sector funds
mutual funds that focus on specific industry or sector such as technology stocks
technology funds
mutual funds that focus on stocks on internet-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
growth funds
mutual funds that focus on stocks with potential for above-average growth
Ginnie Mae funds
mutual funds that invest in bonds issued b the government national mortgage association
global bond funds
mutual funds that invest in foreign bonds as well as US bonds
municipal bond funds
mutual funds that invest in municipal bonds
socially responsible stock funds
mutual funds that screen out firms viewed as offensive by some
socially responsible stock funds
mutual funds that screen out firms viewed by some as offensive
closed-end mutual funds
mutual funds that sell shares to investors but do not repurchase them; instead fund shares are purchased and sold on stock exchanges
interest payments are taxed on...
ordinary income
capital gains distributions
proceeds received from the sale of securities are distributed to shareholders
institutional investors
professionals who are responsible for investing the money of a financial institution on behalf of their clients
bonds
return from investing in bonds is in the form of coupon payments and price appreciation
mutual funds
return from investing in mutual funds come from coupon (interest) or dividend payments generated by the portfolio of the fund
calculating the return of a investment
return= price when sold- price when purchased/ price when purchased
growth stocks
stocks of firms with substantial growth opportunities
income stocks
stocks that provide investors with periodic income in the form of large dividends
ticker symbol
the abbreviated term that is used to identify stock for trading purposes
premium
the amount by which a closed end fund share price in the secondary market is above the funds NAV
discount
the amount by which a closed-end fund share price in the secondary market is below the funds NAV
premium
the amount by which a closed-end funds share price in the secondary market is above the funds NAV
discount
the amount by which a closed-end funds share price in the secondary market is below the funds NAV
expense ratio
the annual expenses per share divided by the net asset value of a mutual fund -average expense ratio is 1.5 percent
standard deviation
the degree of volatility in the stocks return over time
inflation
the increase in the general level of prices of products and services over a specified period
net asset value (NAV)
the market value of the securities that a mutual fund has purchased minus any liabilities owed
net asset value (NAV)
the market value of the securities that a mutual fund has purchased minus any liabilities owed (usually reported on a per share basis)
fiscal policy
the means by which the U.S government imposes taxes on individuals and corporations and by which it spends its money
market risk
the susceptibility of a mutual funds performance to general stock market conditions
gross domestic product (GDP)
the total market value of all products and services produced in a country