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Personal Finance vb

Personal Finance Vocab Chapter 11-13

QuestionAnswer
Asset allocation decision The decision of which mix of broad classes of investments will meet needs for return and risk
Bond A security representing debt of the issuer.
Commercial Bank A financial institution that accepts deposits and makes loans.
Commission-based investment advisor Advisor compensated by commissions from the investments sold to clients.
Credit union A financial institution that is owned by its members. Members finance the credit union by making deposits, and the credit union extends loans to its members.
Depositary financial institution Raises funds by accepting deposits from customers.
Equity Funds that owner have invested in their business
Fee-based investment advisor Advisor who charges a fee for services rendered.
Finance company A financial institution that extends loans to its customers but raises funds from investors rather than accepting deposits
Financial intermediary Any financial institution that collects funds from investors and supplies these funds to business and other entities (e.g., a government) that need funds.
Investment monitoring Process of assessing investments to determine if they meet goals.
Marketable securities Securities that trade on open financial markets.
Money market mutual fund Mutual fund that invests in money market securities.
Mutual fund Financial institution that raises funds by selling its stock to investors and investing those funds in securities such as stocks and bonds of other companies.
Pension fund A fund holding and investing funds contributed by companies and/or their employees to provide an income for employees who retire.
Precautionary motive The need to hold cash as a cushion for emergency use.
Real estate investment trust A company that invests in income-producing real estate property.
Retirement funds Funds-holding investments to provide retirement income.
Return on investment Profit per period for each dollar invested.
Securities brokerage firms Securities firms that act as an agent to transact securities from one investor to another.
Stock A security that represents ownership in a corporation.
American Depositary Receipt (ADR) Receipt for stock of a company in a foreign country.
Ask price Price for which active sellers offer to sell a stock.
Bid price Price for which buyers are actively offering to buy a stock.
Bond rating Ranking that measures a bond's default risk.
Bull market Period when market prices rise.
Cash dividend Corporation's cash payment to shareholders.
Convertible bond Bond that is exchangeable into stock.
Corporate bonds Corporations' debt issues with maturities greater than 1 year
Coupon rate The rate of interest that the bond pays each year based on the face value
Current yield Bond annual interest divided by its market price.
Default Condition occurring when a company fails to pay interest on its debt.
Financial markets Markets that provide the means for buying and selling securities.
Form 10-K Corporation's annual financial statements filed with the SEC.
Goodwill Value of a business over and above its book value.
Initial margin requirement Percentage of funds needed to buy a security with borrowed money.
Limit order Order to buy or sell at a specified price (or better).
Maintenance margin requirement Margin percentage that an investor must maintain in an investment position.
Margin Funds that brokerage firms lend to clients using securities as collateral.
Margin call Call to deposit additional funds in a margin account.
Market index Representative portfolio of securities that measures market performance
Maturity The date when the bond face value must be paid.
Municipal bond Bond issued by states, cities, etc., interest is exempt from U.S. income tax.
Note Bond with maturity of about 3-10 years.
Odd lot Less than 100 shares of stock.
Par value Principal amount of a bond that is paid to the bondholder at maturity
P/E ratio Stock price divided by earnings per share.
Return on equity Measure of company profitability equal to profits divided by equity
Stock symbol One to five letters that uniquely identify a company's stock.
Stock exchange Organization that provides a framework and mechanisms for trading securities.
Stockholders' equity The net value of a corporation: assets less liabilities.
Treasury bonds Fixed-interest bonds issued by the U.S. Treasury with original maturity of 30 years.
Treasury note Bonds issued by the U.S. Treasury with fixed interest and original maturity of 2-10 years.
Yield to maturity The total return over life of a bond.
12b-1 fee Fee paid by some mutual funds to cover fund selling expenses.
Beta Measure of risk relative to the market.
Business risk Variation in a firm's value due to the firm's product.
Closed-end fund Investment company with a fixed number of shares outstanding.
Diversification Combining a number of investments into a portfolio.
Growth investing strategy Buying stocks with potential for high growth.
Interest rate risk Variation in return caused by changes in interest rates.
Large-cap fund Fund that invests in larger companies.
Liquidity risk Risk of being unable to immediately sell an investment at its market value.
Load fund Fund that charges a load to purchase (or possibly redeem) shares.
Management fee Fee paid by a mutual fund to its investment advisor to manage the fund's portfolio.
Management risk Variation in a firm's return attributable to the company's management.
Market risk Variation in returns that is related to market returns.
Mid-cap fund Fund that invests in firms in the middle range of size.
Net asset value Total net assets of a fund divided by the number of shares outstanding.
No-load fund Fund that does not charge a load to buy or redeem shares.
Open-end fund Fund that sells and redeems shares directly to investors at net asset value.
Portfolio Set of investments that are managed as a group.
Standard deviation Measure of variation in stock returns that measures risk.
Created by: dreadzone