Last Chapters of Personal Finance

Income Fund

to produce current income in the form of interest or dividends

A __________ allows you to delay paying income tax on the contributions until you withdraw the money at retirement age.​

traditional IRA

A securities exchange is a form of auction market where ​stock is sold to the highest bidder (buyer) and bought from the lowest offeror (seller).

true

Global Fund

purchases international stocks and bonds as well as U.S. securities

You can buy and sell securities through a __________ (physical place) or over the counter (by phone or computer).​

securities exchange

income stocks

stocks that have a consistent history of paying high dividends

market value

The price for which stock is bought and sold in the marketplace.

Load

The sales fee charged for buying a mutual fund through a broker.

dividend reinvestment

The use of dividends previously earned on the stock to buy more shares.

An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments that earn interest in return for regular disbursements, usually at retirement.​

True

An estate must be worth more than a certain amount to be subject to federal estate taxes.

True

Appreciation is one way that the equity in your home increases.

True

Because preferred stock pays a fixed dividend, it is less risky than common stock, but generally earns a lower return when the company does well.​

True

Debentures are unsecured bonds. Secured bonds (such as mortgage bonds) are secured by a specific asset.​

True

Inflation is a major concern to people on fixed retirement income.

True

Money market funds invest in safe, liquid securities.​

True

To evaluate a mutual fund, examine its prospectus and other published information on the fund and learn about the fees involved. ​

True

With a reverse mortgage, you can receive payments equal to a percentage of your equity.

True

You can track your stock's progress by reading the stock listings in print publications and online.​

True

You will be eligible for Social Security benefits at retirement if you worked and paid Social Security taxes for the required number of years.​

True

The person who is given control of a trust is called a(n)

Trustee

registered bond

a bond registered in the owner's name by the issuing company

With a __________, you pay taxes on the contributions but pay no taxes on the earnings when withdrawals are made at retirement.​

Roth IRA

401k Plan

a defined-contribution plan for employees of companies that operate for a profit

403(b) Plan

a defined-contribution plan for employees of government or nonprofit organizations

__________ investors are speculators who try to make a quick profit by buying on margin or selling short.​

Short-term

A short document that identifies what your heirs will receive is called a

Simple Will

A beneficiary of a trust could include which of the following?

Spouse, Friend, Children

growth stocks

Stocks in corporations that reinvest their profits into the business so that it can grow.

blue-chip stocks

Stocks of large, well-established corporations with a solid record of profitability.

No-Load Fund

a mutual fund that has no commission fee

stock index

a statistic that tracks how the prices of a specific set of stocks have changed

defensive stock

a stock that remains stable during declines in the economy

Which type of trust takes effect when a person dies?

Testamentary

ticker symbol

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

face value

The amount the bondholder will be repaid at maturity.

The earliest age at which (reduced) Social Security retirement benefits are payable is

62

With a traditional IRA, you must begin making withdrawals by age

70.5.

agency bond

A bond issued by government agencies and by government-sponsored enterprises.

municipal bond

A bond issued by state and local governments.

public corporation

A company whose stock is traded openly on stock markets.

convertible bond

A corporate bond that can be converted to shares of common stock.

debenture

A corporate bond that is based on the general creditworthiness and reputation of the company.

Earnings Per Share (EPS)

A corporation's after-tax earnings (net profit) divided by the number of common stock shares outstanding (shares in the hands of investors).

Prospectus

A legal document issued by an investment company that provides details about the securities it offers for sale.

securities exchange

A marketplace where brokers who are representing investors meet to buy and sell securities.

general obligation bond

A municipal bond backed by the power of the issuing state or local government to levy taxes to pay back the debt.

revenue bond

A municipal bond issued to raise money for a public-works project.

Index Fund

A mutual fund that was designed to reduce fees by investing in the stocks and bonds that make up an index

Growth Fund

A mutual fund whose investment goal is to buy stocks that will increase in value over time.

bear market

A prolonged period of falling stock prices and a general feeling of investor pessimism.

bull market

A prolonged period of rising stock prices and a general feeling of investor optimism.

SEP

A retirement plan for small businesses, similar to that for self employed individuals

Keogh Plan

A tax-deferred retirement savings plan available to self-employed individuals and their employees.

Roth IRA

A type of IRA where contributions are taxed, but earnings are not.

preferred stock

A type of stock that pays a fixed dividend but has no voting rights.

common stock

A type of stock that pays a variable dividend and gives the holder voting rights.

__________ stocks are affected by ups and downs in the economy.​

Cyelical

An automatic way to transfer the title of property between spouses is called

Joint Tenancy

Which retirement plan is designed for self-employed individuals?

Keogh

__________ investment strategies are buy and hold, dollar-cost averaging, direct investment, and reinvestment of dividends.​

Long Term

The U.S. government provides health insurance to those age 65 and older called

Medicare

dividends

Money paid to stockholders from the corporation's earnings.

__________ use money pooled from many investors to buy securities that fit the fund's stated objectives.​

Mutual funds

__________ is calculated as the total value of the fund's investments minus its liabilities, divided by the number of outstanding shares.​

Net Asset Value (NAV)

Family of Funds

a variety of mutual funds covering a whole range of investment objectives

__________ bonds are issued by government agencies and by government-sponsored enterprises.​

agency

vested

an employee is ? after he or she has worked for an employer for a specified number of years

par value

An assigned dollar value given to each share of stock.

stock split

An increase in the number of outstanding shares of a company's stock.

__________ stocks provide a relatively safe but moderate return​.

Blue-chip

mortgage bonds

Bonds that are secured by real property.

A Roth IRA offers full tax-free benefits; no tax is levied on money used for a Roth IRA.

False

Any working person can make the maximum contribution to an IRA.

False

Gift taxes are levied against the person receiving the gift, not against the estate.

False

Inheritance taxes are levied against the estate of a decedent by the federal government.

False

Insurance needs do not change with retirement.

False

SEP plans are tax-deferred plans for self-employed people. Keogh plans are a tax-deferred plans for employees of small businesses. ​

False

Social Security benefits are usually sufficient to provide a comfortable retirement.

False

The par value printed on the stock certificate is the same as the market value that investors actually pay for the stock.​

False

U.S. savings bonds and Treasury securities are considered one of the riskiest ​investments because they are backed by the full faith and credit of the U.S. government.

False

__________ invest in stocks that are expected to earn future capital gains, whereas __________ invest to provide current income on a steady basis in the form of interest and dividends.​

Growth funds; income funds

What term describes a person who dies without a will?

Intestate

callable

When a bond can be paid off before its maturity date

Fixed-rate investments

bonds are considered this because a specified amount of interest is paid on a regular schedule

buying on margin (leverage)

borrowing money to buy stocks

floor brokers

buy and sell stocks on the exchange (trading floor)

speculator (day trader)

buys and sells stocks within a short period of time

Balanced Fund

invests in a mixture of stocks and bonds rather than stocks alone

Owners of __________ bonds can exchange their bonds for common stock if they want to take advantage of higher stock prices.​

convertible

defined contribution plan

employees receive a periodic or lump-sum payment based on their account balance and investment performance

Defined-Benefit Plan

employees receive a set monthly payment based on wages earned and number of years of service

Bonds​ are loans that a corporation or government body must repay at __________, with interest.

face value

Corporations that issue __________ stocks pay profits to stockholders in the forms of dividends.​

income