Personal Finance Test Review Ch. 15-17

Syndicate

(n) association of individuals/companies formed for a project requiring much capitol

Chapter 15

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Chapter 16

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Chapter 17

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Basic Unit Of Gold Bullion

1 kg

Contingent Deferred Sales Load fund

A 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund.

General Obligation Bond

A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it.

Subordinated Debenture

A bond having a claim on assets only after the senior debt has been paid off in the event of liquidation

Zero-coupon bond

A bond paying no coupons that sells at a discount and provides only a payment of par value at maturity.

Registered Bond

A bond that is registered in the owner's name by the issuing company.

Bonds

A certificate issued by a government or private company which promises to pay back with interest the money borrowed from the buyer of the certificate: The city issued bonds to raise money for putting in new sewers.

Mortgage Bond or Secured Bond

A corporate bond secured by various assets of the issuing firm

12b-1 Fee

A fee that an investment company levies to defray the costs of advertising and marketing a mutual fund.

Sinking fund

A fund that the issuer sets up with mandatory payment s to guarantee the capital to repay the bond issue. Decreased risk & thus yield.

Mutual fund

A group of financial investments often of a specific kind or category, managed by professionals, with many individual or institutional investors.

Load fund

A mutual fund in which investors pay a commission (as high as 8.5 percent) every time they purchase shares.

No-Load Fund

A mutual fund in which the individual investor pays no sales charge.

Socially Responsible Fund

A mutual fund that actively and directly incorporates ethics and morality into the investment decision.

Limited Partner

A partnership in which only certain partners have personal liability

Limited Partnership

A partnership in which only certain partners have personal liability

Inflation

A rise in the general level of prices in an economy.

Reinvestment Plan

A service provided by an investment company in which shareholder income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund.

Global Fund

A type of mutual fund, closed-end fund or exchange-traded fund that can invest in companies located anywhere in the world, including the investor's own country. These funds provide more global opportunities for diversification and act as a hedge against inflation and currency risks.

Switching Privileges

Ability to switch from fund to fund

Participation Certificates

An investment in a group of mortgages that have been purchased by a government agency.

Asset Allocation

An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance and investment horizon.

Federal Agency Debt Issues

An organization that manages government bonds. Examples of these are Fannie Mae, Ginnie Mae, and Freddie Mac. They have a slightly higher risk than Treasury securities (and thus slightly higher interest rates), are issued for 1-30-year terms (with a 12-year term being the average), have their minimum denominations possibly being as high as $10,000-$25,000, and their agency debt is callable before maturity. This term is one of the reasons why federal, state, and local governments issue bonds, and/or one of the reasons why investors purchase government bonds (Objective 4).

Serial Bonds

Bonds of a single issue that mature on different dates.

Debenture Bond

Bonds that are unsecured (i.e., not backed by any collateral such as equipment).

Convertible Bonds

Bonds that can be converted into common stock at the bondholder's option

Callable bond

Bonds that give the issuer the option to retire them at a stated amount prior to maturity

Revenue Bond

Bonds that pay interest from specified revenue sources (e.g., airports, school districts, counties, toll-road authorities, and governmental bodies)

Commercial Property

Business property, including office space, shopping centers, stores, theaters, hotels, and parking facilities

Class "c" Fund

Charge a 12b-1 fee but no sales charges. (12b-1 fee is a recurring annual fee.)

Why individuals invest in Corporate Bonds?

For income Interest

Aggressive Growth fund

Funds that invest in speculative stocks with volatile price swings, seeking the greatest long-term capital appreciation possible. Also known as maximum capital gains funds and capital capital appreciation funds.

Collectibles

Items of personal interest to collectors that can increase in value in the future include rare coins, works of art, antiques, stamps, rare books, comic books, sports memorabilia, rugs, ceramics, paintings, and other items that appeal to collectors and investors.

Bond Indenture

Legal document containing complete details of a bond issue

Corporate Bonds

Long-term debt issued by private corporations typically paying semi-annual coupons and returning the face value of the bond at maturity.34

Precious Medals

Medals such as Gold and silver that have a hight value.

Sector Fund

Mutual Funds that purchase stocks of companies in the same industry.

Money Market Fund

Mutual funds that invest in short-term, low-risk securities and allow investors to write checks against their accounts

Real Estate Investments Trusts

REIT business trust that invests primarily in real estate and meets certain other requirements

Hybrid REITS

REITs that invest in both properties and mortgages

Equity REITS

REITs that invest in income producing properties

Mortgage REITS

REITs that purchase mortgage obligations and effectively become real estate lenders

Treasury Bill

Short-term government securities issued at a discount from face value and returning the face amount at maturity.24

Treasury Inflation Protected Securities

TIPS are U.S. government bonds the par value of which changes with inflation

Expense Ratio

The amount that investors pay for all of a mutual fund's management fees and operating costs.

Maturity Value

The amount that is due at the maturity or due date of a note.

Maturity Date

The date on which an investment becomes due for payment.

Face Value

The payment to the bondholder at the maturity of the bond.

Why Would you invest in diamonds?

They are rare and normaly go up in value

Treasury Bond

US government obligations with original maturities of more than 10 years. They are issued in $1000 denominations and pay interest semiannually

Bond Quote in Percentages

When a bond is quoted in a dollar price, that price is a percentage of par. So a bond price of $104.312 is really 104.312% of the par amount.

Municipal Bond

a bond issued by a state or local government or municipality to finance such improvements as highways, state buildings, libraries, parks and schools

Bearer Bond

a bond that is not registered in the investor's name

Illiquidity

an inability to convert assets into cash quickly

Direct Real Estate Investments

an investment in which the owner holds the title to the property he/she has purchased

High Yield Bonds

bonds with low credit quality that offer a high yield to maturity, aka junk bonds

Real Estate Investments

business trust that invests primarily in real estate and meets certain other requirements

Treasury Note

certificates issued by the US Treasury in exchange for minimum amounts of $1,000 and maturing in 1 to 10 years

Exchange Traded Fund

collections of stocks and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds

Stright Line Depreciation

cost asset - salvage value / length of dep.

Closed end Mutual fund

fund that sells a fixed number of nonredeemable shares, which are then traded OTC like common stock. the price fluctuates with the value of the underlying assets

Indirect Real Estate Investments

investor owns real estate through a trustee or company that holds the title to the real estate

Registered Coupon Bond

is a bond that is registered in the owners name for the face value only and not for interest.

Savings Bond

issued by the federal government as a way of borrowing money; purchased by individuals at half of face value and then increase in value every six months until they reach full face value

Open end Mutual Funds

make ip the largest number of funds on the market. simply issue new shares when someone wants to buy into the fund

Short Term bonds

one year or less

Long term bonds

riskier, holder of bonds have to wait longer for repayment. tend to have higher interest rates

Capital Gains Tax

the tax paid by businesses and investors when they sell stocks or real estate for a profit