TEST 3 | FINA 369 - PERSONAL FINANCE, Quizzes of Business Finance

Download TEST 3 | FINA 369 - PERSONAL FINANCE and more Quizzes Business Finance in PDF only on Docsity! TERM 1 common stock DEFINITION 1 are a form of equity. each share of stock represents a fractional ownership position in a corporation. equal participation in the corporation, equal vote and voice in management. has no maturity date. TAXES ARE PAID ON DIVIDENDS TERM 2 Bonds DEFINITION 2 bonds are liabilities. gverments and corporations give out bonds that pay a stated return called interest. tipically paid every 6 months plus the return of the face value of the bond. a bond can be sold before maturity.usually 20 yearsCall feature: not all have it. if Co. cant pay interest can pay early bond. TERM 3 Preferred stock DEFINITION 3 these are hybrid securities that have both stock and bond characteristics. Preferred stock are issue as stoc and therefore represent an equity in a corporation. These have a stated dividend that are paid before common stuck get paid. As bond they pay dividends as they pay when the time of purchase. first to receive money in liquidation TERM 4 convertible bonds DEFINITION 4 these provide the fixed income benefits of a bond while offering the price appreciation potential of common stock.it can be converted to shareshas to wait certain time TERM 5 mutual funds DEFINITION 5 are org. that invests in and professionally manages a diversified portfolio of securities.These sell shares to investors, who then become part owners of the funds securities portfolio.+ diverse + convinient TERM 6 Primary Market DEFINITION 6 in the PM, new securities are sold to the public and one party of the transaction is always the issuer. A security is sold in the PM just once, when is first issued. investment bankers are involved in this market. TERM 7 Secondary Market DEFINITION 7 these are where the old securities are bought or traded between investors. these permit investors to execute transactions among themselves. these do not generate cash for the issuersecurity exchange: buyers-sellers brought together to execute the tradenasdaq market: electronic platform to execute trade TERM 8 OTC DEFINITION 8 over the counter market deals in smaller, unlisted securities. TERM 9 Bid Price and Ask Price DEFINITION 9 these represent respectively the highest price at which the security is offered for purchase a given security and the lowest price at which the security is offered for sale in the dealers market. TERM 10 SEC DEFINITION 10 securities and exchange commission: an agency of the fed. gov. that regulates the disclosure of information about securities and generally oversees the operation of the securities exchanges and markets. established to avoid another depression TERM 21 S&P 500 DEFINITION 21 the standard and poor indexes are similar to the dow jones aveg in that both are used to capture the overall performance of the market. the S&P uses a lot more stocks (500). DIJA uses 30. they are also large stock. is an index dow jones is an average TERM 22 Wilshire 500 DEFINITION 22 an index of the total market value of the approx. 6000-7000 or so most actively traded stocks in the U.S. accounts for 98- 99% of all market. TERM 23 business risk DEFINITION 23 the degree of uncertainty associated with the firms cash flow and with its subsequent ability to meet its operating expenses. TERM 24 market risk DEFINITION 24 a type of risk associated with the price volatility of a security TERM 25 financial risk DEFINITION 25 a type of risk associated with the mix of debt and equity financing used by the issuing firm and its ability to meet its financial obligations. TERM 26 purchasing power risk DEFINITION 26 a type of risk resulting from possible changes in price levels, that can significantly affect investment returns. inflation and value of the dollar affects this TERM 27 interest rate risk DEFINITION 27 a type of risk resulting from changing market interest rate that mainly affects fixed income securities. such as preferred stock, CD etc. TERM 28 liquidity risk DEFINITION 28 a risk associated with the inability to liquidate an investment conveniently and at a reasonable price. TERM 29 event risk DEFINITION 29 the risk that some major, unexpected event will occur that leads to a sudden and substantial change in the value of an investment TERM 30 return from investing DEFINITION 30 any investment vehicle- wether it is a share of stock, a bond, a piece of real state, or a mutual fund, has two basic form of return: current income and capital gains. CG: from selling whole at a higher price Current income: received with some degree of regulatory. ex rent, interest from bonds. TERM 31 the risk return trade off DEFINITION 31 the amount of risk associated with a given investment vehicle is directly related to its expected return. if you want a higher return you have to take a higher risk. TERM 32 blue chip stock DEFINITION 32 a stock generally issued by companies expected to provide an uninterrupted stream of dividends and good long term growth prospects. coke, exxonbig, safe TERM 33 growth stock DEFINITION 33 a stock whose earnings and market price have increased over the time a rate well above average. capital gainsnot dividends TERM 34 tech stock DEFINITION 34 a stock that represents the technology sector of the market TERM 35 income stock DEFINITION 35 a stock whose appeal is the dividends it pays out; offers dividend payments that can be expected to increase over the time. TERM 46 no load fund DEFINITION 46 a fund on which no transaction fees are charge TERM 47 back end load DEFINITION 47 a commission charged for redeeming fund shares TERM 48 front end load DEFINITION 48 charges a commission when the shares of the fund are purchased. TERM 49 12(b)-1 DEFINITION 49 an annual fee that's supposed to be used to offset the promotion and selling expenses TERM 50 management fees DEFINITION 50 a fee paid to the professional money managers who administer a mutual funds portfolio TERM 51 Growth funds DEFINITION 51 the objective is capital appreciation. They invest principally in common stocks with above average growth potential. long term investment vehicle. TERM 52 index fund DEFINITION 52 rather than trying to beat the market, index funds simply try yo amtch the market. its based on buy and hold policy. inles the targeted market index alters its market basket of securities. TERM 53 sector fund DEFINITION 53 restricts its investment to a particular sector of the market. TERM 54 asset allocation fund DEFINITION 54 these funds spread investors money across all different types of markets. TERM 55 SS ages for benefit DEFINITION 55 for anyone born later than 1960 the SS administration defines as full retirement age as age 67. if born before 1960 your full retirement age is between 65 and 67. TERM 56 noncontributory pension plan DEFINITION 56 A pension plan in which the employer pays the total cost of the benefits TERM 57 contributory pension plan DEFINITION 57 a pension plan in which the employee beas part of the cost of the benefits TERM 58 defined benefit plan DEFINITION 58 a pension plan in which the formula for computing benefits is stipulated in its provisions. %*avg salary of x last years* numbers of yrs worked in company TERM 59 defined contribution plan DEFINITION 59 a pension plan specifying the contributions that both employer and employee must make; it makes no promises concerning the size of the benefits at retirement. TERM 60 401(k) plan DEFINITION 60 an agreement by which part of the convered employee's pay is withheld and invested in some form of investment; taxes on the contributions and the account earnigs are deferred unitl the funs are withdrawn. TERM 71 codicil DEFINITION 71 a document that legally modifies a will without revoking it. TERM 72 revocation of a will DEFINITION 72 his health or financial circumstances change significantly.births, deaths, marriages, or divorces alter the operative circumstancesthe testator moves to a state other than where the will was executedan executor, trustee or guardian can no longer servesubstantial changes occur in the tax law TERM 73 letter of last instructions DEFINITION 73 an informal memorandum that is separate from a will and contains suggestions or recomendations for carrying out a decendets, wishes. TERM 74 executor DEFINITION 74 the personal representative of an estate designated in the decedents will. TERM 75 durable POA DEFINITION 75 durable power of attorney for financial matters: legal doc. that authorizes another person to take over someones financial affairs and act on his or her behalf. TERM 76 living will DEFINITION 76 a doc that precisely states the treatments a person wants if he or she becomes terminally ill TERM 77 durable POA for health care DEFINITION 77 legal doc authorizes an individual to amke health decisions on behalf of the principal when the principal is unable to make such decisions. also called advanced directive for health care. TERM 78 joint tenancy with right of suvivorship DEFINITION 78 a type of ownership by two or more parties, with the suvivors continuing to hold all such property on the death of one or more of the owners.Right of suvivorship: the right of surviving joint owners of property to receive title to the deceased joint owners interest in the property. TERM 79 tenancy by the entirety DEFINITION 79 a form of ownership by husband and wife, recognized in certain states in which property automatically passes to the surviving spouse. TERM 80 tenancy in comon DEFINITION 80 a form of co-ownership under which there is no right of suvivorship and each co-owner can leave his or her share to whomever he or she desires. TERM 81 trust DEFINITION 81 a legal relationship created when one party transefers property to a second party for the benefit of third parties. TERM 82 gift tax DEFINITION 82 a tax levied on the value of certain gifts made during the givers life time TERM 83 gift tax exclusions DEFINITION 83 Anual exclusions: the gift tax law allows a person to give gifts- present interest with no strings attached- up to a specified annual amount per calendar year to any number of recipients.up to 13,000 per person per year spouses up to 26K and lifetime exlusion up to 5 mill. TERM 84 interest dividends DEFINITION 84 check mailed to you TERM 85 vesting DEFINITION 85 how long you have to be in the company before you can gettheir money. usually at least 4 to 5 yrs. TERM 96 open end funds DEFINITION 96 much bigger category. infinite number of stocks and taking money. if too big might close for new inverstors. but no close end. TERM 97 NAV DEFINITION 97 Net asset value is the price per share of stock TERM 98 SEP DEFINITION 98 simplified employee pension: is a variation of IRA in the U.S applied to business owners and their employees. TERM 99 secondary dealer market DEFINITION 99 nasdaq + OTC marketbuyer and seller never met. people buy and sell through a securities dealer. bid price and ask price pink sheets are unregulated TERM 100 interest rates and the bond prices DEFINITION 100 high interest rates, low bond prices and opposite you can buy at high interest rate a low bond and sell it at a lower interest rate and a higher price.