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PFL Unit 3
Vocabulary for PFL Unit 3
| Term | Definition |
|---|---|
| Risk | A potential loss of assets or earning potential. |
| Emergency fund | Money that is set aside to be used in an urgent situation such as loss of a job, an illness, or a major expense. |
| Liquid account | An account that can be easily converted into cash, such as a savings, money market, or checking account. |
| Interest | The cost of borrowing money, expressed as a percentage of the principal; in investing, it is the money your money earns. |
| Maturity value | When an investment, such as a CD, has reached its highest value, which is at the end of its term. |
| Financial intermediary | A business, such as a bank or credit union, that acts as a middleman between lenders and borrowers. |
| Car loan | Borrowed money used to purchase an automobile; usually the money is paid back in two to six years, with interest. |
| Collateral | Something provided to a lender as a guarantee of repayment which is forfeited in the event of default (nonpayment). |
| Lien | The right the lender has to repossess the car if the borrower cannot pay back the loan. |
| Car lease | The use of a car for a fixed period of time at an agreed amount of money; the car must be returned or purchased at the end of the term. |
| Down payment | An initial amount paid at the time of purchase of an expense good or service; typically only represents a percentage of the full purchase price while the rest is paid using credit. |
| Depreciation | The lost value of a product (i.e. car) over time due to age, wear, and tear. |
| Finance charges | Fees that are paid as a cost of borrowing. This includes interest payments, late charges, account maintenance fees, and loan origination fees, among others. |
| Annual percentage rate (APR) | The rate of interest charged on borrowed money for an entire year, which includes the effects of fees and other added costs. |
| Tax, title, and license (TT&L) | Local and state sales taxes, fees to obtain the car title, and license fees to register the car with the state. |
| Contract | A legal agreement between two parties that is enforceable by law. |
| Truth in Lending Act | A federal regulation that protects consumers by requiring lenders to provide standardized loan cost information on contracts. |
| Investment | Anything you acquire for future income or benefit. |
| Principal | The amount of money invested, loaned, or borrowed. |
| Compound interest | Interest paid on previously earned interest as well as on the original deposit or investment. |
| Simple interest | Interest calculated on the principal, or original, amount of a loan. |
| Investing | Using money to purchase something, such as stocks and bonds, that you |
| Return on investment (ROI) | A measure of the amount of gain or loss an investment brings the investor. expect to provide you with a profit in the future. |
| Certificate of Deposit (CD) | A certificate purchased at a bank; accessing the funds early will result in a penalty but at the maturity date, the purchaser receives the purchase amount, plus interest. |
| Bond | Lending money to the government or a corporation for a specific time period; at maturity, the government or corporation pays back the purchase amount, plus interest. |
| Mutual funds | A type of investment that enables investors to pool their money together into one professionally managed investment consisting of stocks and/or bonds. |
| Money market account (MMA) | A savings account that requires a higher balance than normal savings accounts, allows limited withdrawals, but earns higher interest rates. |
| Real estate investing | An investor purchases a home to rent to others; the owners receives rent payments and may also sell the home for a profit later. |
| Stocks | An ownership share in a company that you can sell later and may increase in value as the company grows. |
| Dividend | Earnings from a company distributed to its shareholders. |
| 401K Plan | A retirement savings plan sponsored by an employer allowing workers to save and invest pre-tax dollars from their paycheck; employers often make contributions to their employees' plans. |
| Individual Retirement Account (IRA) | A type of retirement savings account that allows individuals to direct pretax income towards investments that can grow tax-deferred; no capital gains or dividend income is taxed until it is withdrawn. |
Created by:
joann.roe
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