General Vocabulary Flashcards
Risk Profiling
the quantification of an investor’s overall risk tolerance
Risk Enhancement
a risk response strategy aimed at increasing the probability of a positive risk occurrence
Risk Acceptance
occurs when a business or individual acknowledges that the potential loss from a risk is not great enough to warrant spending money to avoid it
Risk Transference
handing the risk off to a willing third party
Risk Avoidance
seeks to avoid compromising events entirely
Risk Reduction
reduce the frequency or severity of losses
Auto Liability Coverage
mandatory in most states; Bodily injury liability may help pay for costs related to another person’s injuries if you cause an accident; Property damage liability may help pay for damage you cause to another person’s property while driving
Uninsured and Underinsured Motorist Coverage
helps pay for costs incurred by another uninsured or underinsured driver; required in some states
(Auto) Collision Coverage
helps cover damages to car or replace car if If you’re involved in an accident with another vehicle, or if you hit an object such as a fence
(Auto) Comprehensive Coverage
helps cover costs or replace car if it is damaged by a covered peril other than collisions (theft, fire, vandalism)
(Auto) Medical Payments Coverage
helps cover costs if If you, your passengers or family members who are driving the insured vehicle are injured in an accident
(Auto) Personal Injury Protection
helps pay for medical and other expenses incurred due to your injury such as childcare expenses or lost income
(Auto) Gap Coverage
helps pay off your auto loan if your car is totaled or stolen)
Renter’s Insurance
covers losses from theft, water backup damage, certain natural disasters, bodily injuries and more in a rented property
Worker’s Compensation
paid by employer who cannot require the employee to contribute to the cost of compensation
Disability Insurance
replaces some of a working person’s income when a disability (illness or injury) prevents them from working; It does not cover medical care or long-term care services
Long-Term Care Insurance
covers long-term care costs generally not covered by health insurance, Medicare, or Medicaid
Co-Payments
a set fee you pay for a doctor visit or a prescription; helps protect against moral hazard
Exclusions
types of damage that are not covered by your insurance
Underwriting
sign and accept liability under an insurance policy, thus guaranteeing payment in case loss or damage occurs
Global Insurance Program
a multinational insurance program with a coverage territory encompassing the entire world, including the country in which the insured is domiciled
COBRA/Consolidated Omnibus Budget Reconciliation Act
gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time (18 or 36 months) under certain circumstances (“qualifying acts”)
Insurance Agent
represents one or multiple insurance companies and sells their policies, usually for a commission; licenced professionals
Insurance Broker
an intermediary who sells, solicits, or negotiates insurance on behalf of a client for compensation; licenced professional
Insurance Agent Vs. Broker
Insurance agents represent the insurance provider that employs them and help sell policies from that single provider. Insurance brokers represent the consumers who use them and can help them shop for policies from multiple providers
Insurance Actuary
uses mathematics, statistics and financial theory to analyze the financial cost of risks
Principle of Subrogation
allows your insurer to recover the costs associated with a claim, such as medical bills, repairs costs, and your deductible, from the at-fault party’s
Rider
an addition to an existing life insurance policy that allows you to add specific insurance products to your basic coverage
Presumptive Disability
where a loss is presumed to be total and permanent due to loss of sight, hearing, speech or loss of two limbs
Health Insurance Portability and Accountability Act (HIPAA)
Required the creation of national standards to protect sensitive patient health information from being disclosed without the patient’s consent or knowledge
Asset
anything that has economic value
Asset Allocation
The blend of assets chosen for an investment portfolio
Bonds
pay interest on the investment, but the amount of money that is invested can be locked and inaccessible until the end of the bond period
Bond Maturity
the date when a bond’s principal is repaid with interest
short-term bond
matures within 1-3 years
long-term bond
maturity period greater than 10 years
capital gain/loss
selling an investment for more or less than you bought it for
Asset classes
cash, equities, fixed income/bonds, alternative investments/real estate
ETF/Exchange Traded Funds
fund that tracks a specific industry, commodity, or index; trade like stocks
Index Fund
measures the performance of a group of assets
Mutual Funds
pool of money gathered from many investors and invested in stocks, bonds and other assets by a professional manager; considered some of the safest investments in the market for retirement accounts to invest in because of the diversification in assets that many aim for
Real Estate
Property that consists of land or buildings
Retirement Account
tax-advantaged account used to finance retirement
Security
A stock, bond or other investment instrument that can be traded; sale of securities is regulated by the SEC
SEC/Securities and Exchange Commission
protects investors, maintains fair, orderly, and efficient markets, and facilitates capital formation
Stock
a security that represents a share of ownership in a company; may also be called shares or equities
Bear Markets
stock prices are falling, and investing is risky but potentially very rewarding. Bear markets tend to occur during an economic downturn
Bull Markets
stock prices are rising, so investments aren’t as risky but don’t provide the same opportunity for a large reward. Bull markets tend to last longer than bear markets
Common Stock
voting rights, dividends fluctuate depending on current profit levels, more volatility
Preferred Stock
no voting rights, dividends are set, more stable (preferred stock dividends are prioritized over common stock dividends)
Stock Market Index
an index that measures the performance of a stock market, or of a subset of a stock market
Share
unit of ownership
Liquidity
how easily an asset converts to cash
Real estate investment trusts/REIT
mutual fund that invests in real estate
Ask
the amount a seller is willing to accept for a security
Bid
the amount an investor is willing to pay for a security
Balance Sheet
information about a company’s assets (left) and liabilities (right), and the shareholders’ equity that results
Income Statement
shows the company’s revenues and expenses during a particular period
Cash Flow Statement
a financial statement that shows how cash entered and exited a company during an accounting period
ISA/Individual Savings Account
savings account you NEVER pay tax on; restriction on how much you can invest in a given year
Pension
a fund into which amounts are paid regularly during the individual’s working career, and from which periodic payments are made to support the person’s retirement from work
Revolving Credit
lets you borrow up to a predetermined credit limit. At the end of each billing cycle, you can either repay what you’ve borrowed in full or carry over (“revolve”) a balance to the next month, making only a minimum payment
Home-Equity Loans
allows you to borrow against the value of your home
Term Life Insurance
lower cost, covers holder in case of death during a predetermined time period, doesn’t accrue cash value
Whole Life Insurance
lasts your entire lifetime, builds cash value, higher premiums
Universal Life Insurance
allows you to adjust premiums, builds cash value, variable death benefit and cash value growth
Variable Life Insurance
cash value growth is tied to investments accounts such as mutual funds and bonds, fixed premiums, (guaranteed death benefit remains constant while the variable death benefit fluctuates)
Cash Value of Life Insurance
While premiums are paid and interest accrues, the cash value builds over time; can be borrowed against, cash can be withdrawn from it but this will reduce the death benefit
Unit Trust
a type of mutual fund where money from many investors (called “unit holders”), is managed by a fund manager to achieve a specific return
Open-Ended Investment Company
regular mutual fund
Closed-Ended Fund
has a fixed number of shares offered by an investment company through an initial public offering
Settlement
final step in the transfer of ownership involving the physical exchange of securities or payment; after settlement, the obligations of all the parties have been discharged and the transaction is considered complete
Investment Trust
a fund that is a public limited company
Hedge Fund
actively managed fund with freer rein to invest aggressively in a wider variety of financial products than most mutual funds; typically open-ended
Primary Market
the issuance and sale of securities to purchasers directly by the issuer (where governments and businesses offer new securities for the first time); most buyers are institutional investors
Secondary Market
Trades take place on the secondary market between other investors and traders rather than from the companies that issue the securities; typically associated with the stock market
Pig Market
investors assume high degrees of risk with a singular focus on short-term profit
Total Return
capital appreciation + income received on the portfolio in the form of interest, capital gains, dividends
Capital Gain
the profit earned on the sale of an asset which has increased in value over the holding period
Bond Duration
measures the bond’s sensitivity to interest rate changes
Futures Contract
a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future
Derivative
a contract that derives its value from the performance of an underlying entity
Options
a derivative that conveys to the purchaser (the option holder) the right, but not the obligation, to buy or sell a set quantity or dollar value of a particular asset at a fixed price by a set date
Swap
derivative contract in which one party exchanges or swaps the values or cash flows of one asset for another
Floating Interest Rate
does not have a fixed rate of interest over the life of the instrument
Arbitrage
the practice of taking advantage of a difference in prices in two or more markets
Embezzlement
a trusted individual taking advantage of their position to steal funds or assets, most commonly over a period of time
Annuity
a series of payments made at equal intervals (regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments)
Top 3 U.S. Indexes
S&P 500, Dow Jones, Nasdaq
Short-Selling
selling a borrowed security and buying it back at a lower price profit from the decrease in its price
Long-Selling
buying then selling assets to profit from an increase in the asset’s price; less risky
Descriptive Vs. Analytic Information
Descriptive research classifies, describes, compares, and measures data. Meanwhile, analytical research focuses on cause and effect.
Demand Deposit Account
a bank account from which deposited funds can be withdrawn at any time, without advance notice
Prospectus
a disclosure document that describes a financial security for potential buyers
Trustee Vs. Executor
an executor administers the estate of the person who died, while a trustee administers a trust for the benefit of the named beneficiaries
Trust Fund
legal arrangements that allow individuals to place assets in a special account to benefit another person or entity
Income Stock
equity financial securities that pay regular and predictable dividends. They are purchased with the purpose of generating a steady stream of dividend flows.
Over-the-counter Stock
securities that are not listed on a major exchange in the United States and are instead traded via a broker-dealer network, usually because many are smaller companies and do not meet the requirements to be listed on a national exchange.
Growth Stock
publicly traded share in a company expected to grow at a rate higher than the market average
Value Stock
a stock that tends to trade at a lower price relative to its fundamentals. The idea behind value investing is that stocks of good companies will bounce back in time if and when the true value is recognized by other investors.
Commercial Paper
short-term unsecured promissory notes issued by companies
Wrap Account
an investment account where a “wrapped” fee or fees cover all of the management, brokerage and administrative expenses for the account
Declaration Date
the date on which the board of directors of a company announces the next dividend payment
Record Date
the last date in which shareholders are eligible to receive a dividend or distribution
FSA/Flexible Spending Account
a special account you put money into that you use to pay for certain out-of-pocket health care costs. You don’t pay taxes on this money.
Living Will
Advanced Healthcare Directive; a written statement detailing a person’s desires regarding their medical treatment in circumstances in which they are no longer able to express informed consent
Intestate
a person who has died without having made a will.
Probate
legal process in which a will is reviewed to determine whether it is valid and authentic; happens after you die
How are dividends taxed?
Qualified dividends are taxed at a capital gains rate, while ordinary dividends are taxed at the standard federal/state rate
larceny
theft of personal property.
White Collar Crime
financially motivated, nonviolent or non-directly violent crime committed by individuals, businesses and government professionals
Coercion
persuading someone to do something by using force or threats
Arbitrator
As impartial third parties, they hear and decide disputes between opposing parties
Mediation vs. Arbitration
The main distinction between the two is who makes the final decision. With mediation, the final decision is a reached agreement between the two conflicting parties, while arbitration calls on an arbitrator to analyze the case details and reach a verdict
Notarization
an identity-based, anti-fraud measure performed by a government-authorized person called a notary
S Corp vs. C Corp
The C corporation is the standard (or default) corporation under IRS rules. The S corporation is a corporation that has elected a special tax status with the IRS and therefore has some tax advantages, but is limited to 100 share holders and is typical of smaller businesses.
General Partnership vs. Limited Partnership
general partners have full operational control of a business and unlimited liability. Limited partners have less liability and do not take part in day-to-day business operations.
Conglomerate
multi-industry company that consists of several different and unrelated business entities that operate in various industries under one corporate group
Skimming/skim pricing
a pricing strategy that sets new product prices high and subsequently lowers them as competitors enter the market
FTC/Federal Trade Commision
protecting the public from deceptive or unfair business practices and from unfair methods of competition
market penetration strategy
when a company works towards a higher market share by tapping into existing products in existing markets
Consideration
a legal term used to describe the benefit each party to a contract receives
Required elements of valid contracts
mutual assent; adequate consideration; capacity; and legality.
Void Contract
a contract that isn’t legally enforceable, starting from the time it was created
Voidable Contract
a valid contract which may be either affirmed or rejected at the option of one of the parties
Unenforceable Contract
a contract that is valid but one that a court chooses not to enforce
Undue Influence
involves one person taking advantage of a position of power over another person; puts the free will of one of the parties entering the contract into question, and therefore leads to the contract being unenforceable and voidable by the victim party.
What is the minor rule in a contract?
minors are considered not to have the legal capacity to enter into the contract, which is why contracts involving minors can be voided. Only the minor, however, has the right to void the contract or decide to honor it.
Statute of Frauds
requires that certain kinds of contracts be memorialized in writing
UCC/Uniform Commercial Code
a comprehensive set of laws governing all commercial transactions in the United States. It is not a federal law, but a uniformly adopted state law
Agency Relationships
is created when one person (the principal) consents to another person (the agent) acting on his behalf
Power of Attorney
WRITTEN/express authorization to represent or act on another’s behalf
Broker
a person or firm who arranges transactions between a buyer and a seller
Testator
a person who has made a will
Trustee
In a trust, a party known as a trustor gives another party, the trustee, the right to hold title to and manage property or assets for the benefit of a third party, the beneficiary
Bailee
a person or party to whom goods are delivered for a purpose, such as custody or repair, without transfer of ownership (storage company, dry cleaner)
Employment-at-will
an employment agreement stating that employment is for an undefined period of time and may be terminated either by employer or employee.
Full vs. Limited Warranty
“Full Warranty” means the coverage meets the federal minimum standards for comprehensive warranties, while “Limited Warranty” means the coverage does not
Negotiable Instruments
a signed document that promises a payment to a specie person or assignee (personal checks, money order, CDs, promissory notes)
Primary vs. Secondary Parties
Primary liability refers to an obligation for which a party is directly responsible. Secondary liability, on the other hand, refers to an obligation that is the responsibility of another party if the party that is directly responsible fails to satisfy the obligation.
Lein
a legal claim against assets that can be used as collateral to repay debt
Chapter 7 Bankruptcy
liquidation; most common for individuals; liquidation of all your assets to pay off debts, any remaining unsecured debt is erased
Chapter 11 Bankruptcy
large reorganization; used to reorganize a business or corporation; the come up with a plan for how the business will operate while paying off its debts, both the court and creditors must approve
Chapter 12 Bankruptcy
family farm; similar to chapter 13, allows family farmers and fishermen to avoid having to sell all their stuff
Chapter 13 Bankruptcy
repayment plan; court reorganizes debt and puts you on a strict repayment plan of both secured and unsecured debt
Deed vs. Title
deed is evidence of a specific event of transferring the title of the property from one person to another. A title is the legal right to use and modify the property how you see fit
Personal Representative
executor; administers the estate of another person
Increasing vs. Decreasing Term Insurance
Increasing: death benefit payout increases every year
Decreasing: death benefit payout decreases every year
Mediation Vs. Negotiation
negotiation involves only the parties, and mediation involves the intervention and assistance of a third party (the mediator)
Rate of Return
the net gain or loss of an investment over a specified time period
High-Yield Savings Account
higher APY, but often, you won’t earn enough over the long-term to account for inflation; rates fluctuate, withdrawal limits, minimum deposit requirements; there are better choices for long term investments
APY/Annual Percentage Yield
the total interest you earn on money in an account over one year
Compounding Period
the time intervals between when interest is added to the account (annually, semi-annually, quarterly, monthly, daily)
APY Vs. Interest Rate
APY is the total interest you earn on money in an account over one year, whereas interest rate is simply the percentage of interest you’d earn on a savings account, investment or loan. In other words, the interest rate of an account is just one component of the account’s APY, which also factors in how often your interests compounds.
Money Market Accounts
combine features of a regular savings account with features of a checking account
Fair Credit Reporting Act
regulate the collection of credit information, which is frequently used to determine mortgage and lending rates. The law limits who can access a consumer’s credit history, and prohibits lenders from providing outdated or inaccurate information. The law also allows consumers to read their own credit reports, and to contest any inaccurate information
Fair Debt Collection Practices Act (FDCPA)
limits the actions of third-party debt collectors when attempting to collect debts on behalf of another person or entity
CAN-SPAM Act
governs email communication; Recipients have the right to stop being contacted
Gramm-Leach-Bliley Act (GBLA)
requires all U.S. financial institutions to reveal in writing how they handle, share, and protect consumers’ information
Children’s Online Privacy Protection Act
governs what information websites directed to children under 13 years of age can collect from their visitors
Fair Housing Act
protects buyers and renters of housing from being discriminated against by sellers, landlords, or financial institutions
Dodd-Frank Act
sweeping reform of U.S. financial regulations
IRAs vs. 401(k)
401(k)s are offered through employers, whereas IRAs are opened by individuals through a broker or a bank
When should you receive your W-2 from your employer?
January 31
When is the deadline to file your taxes?
April 15; an extension will give you an extra 6 months to October
How many federal income tax brackets are there? What is the range?
7 brackets ranging from 10% to 37%
Venture Capital
capital invested in a project in which there is a substantial element of risk, typically a new or expanding business
Fiduciary
someone who manages money or property for someone else; must manage money for benefit of other party and not your own
Consumer Report
contain information on an individual that is not in their credit report, including their “character, general reputation, personal characteristics, or mode of living” and are most often used by employers to check on job applicants
Express Warranty
when a seller makes a guarantee to the buyer that the product/service being offered has certain qualities
Implied Warranty
a guarantee that is not written down or explicitly spoken
General Liability Insurance
property damage and/or injuries to another person caused by an accident in which you’re at fault
Property Insurance
provides financial reimbursement to the owner or renter of a structure and its contents in case there is damage or theft—and to a person other than the owner or renter if that person is injured on the property
Retail Bank
offer members of the general public financial products and services such as bank accounts, loans, credit cards and insurance
Commercial Banks
concentrate on supporting businesses
Cooperative Banks
typically local or community-based associations whose members help determine how the business is operated. They’re run democratically and they offer loans and banks accounts, among other things.
Bank vs. Credit Union
banks are typically for-profit institutions while credit unions are not-for-profit and distribute their profits among their members
Wealth Management
an investment advisory service that combines other financial services to address the needs of affluent clients
Check Register
used to record financial transactions in cash
Bank Statement
a list of all transactions for a bank account over a set period, usually monthly
Components of a Credit/FICO Score
payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%)
Credit Bureau
companies that compile and sell credit reports; Equifax, Experian, and TransUnion
Debt Consolidation
a form of debt refinancing that entails taking out one loan to pay off many others
Debt Avalanche vs. Snowball
Avalanche: Pay off your highest-interest debt first; pay less overall
Snowball: Pay off your smallest balances first; builds motivation
Truth in Lending Act
ensures that creditors provide complete and honest information
Equal Credit Opportunity Act
prevents creditors from discriminating against individuals
Fair Debt Collection Practices Act
established rules for debt collectors
Credit Card Statement
A summary of the transactions on your account—your payments, credits, purchases, balance transfers, cash advances, fees, interest charges, and amounts past due
Credit Rating vs. Credit Score
Credit ratings are expressed as letter grades and used for businesses and governments. Credit scores are three-digit numbers used for individuals and some small businesses
Credit Rating
an evaluation of the credit risk of a prospective debtor;
Escrow
Funds or assets held in escrow are temporarily transferred to and held by a third party, usually on behalf of a buyer and seller to facilitate a transaction. “In escrow” is often used in real estate transactions whereby property, cash, and the title are held in escrow until predetermined conditions are met
How does credit availability change with the business cycle?
Peak=high availability
Trough=contractionary phase/low availability
Tax Deductions Vs. Credits
Deductions can reduce the amount of your income before you calculate the tax you owe. Credits can reduce the amount of tax you owe or increase your tax refund.
HMO/Health Maintenance Organization
delivers all health services through a network of healthcare providers and facilities; least freedom to choose providers; require referal to see a specialist
PPO/Preffered Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; Higher out-of-pocket costs if you see out-of-network doctors vs. in-network providers
POS/Point of Service Plan
blends features of an HMO with a PPO; requires referrals; You can see out-of-network doctors, but you’ll pay more.
Gated Vs. Non Gated
Refers to the need to obtain a referral from your primary care physician before seeing a specialist. With a “Gated” plan, you need a referral, with a “Non-Gated” plan, you don’t.
5 Cs of Credit
Most lenders use the five Cs—character, capacity, capital, collateral, and conditions—when analyzing individual or business credit applications
Exemption Vs. Deduction
both reduce your taxable income; The number of exemptions you can claim depends on your filing status and the number of dependents you have. The kinds of deductions you can claim, however, depend on your expenses.
Bonds Vs. Debentures
Bonds are debt financial instruments issued by financial institutions, big corporations, and government agencies having the backing of collaterals and physical assets. Debentures are debt financial instruments issued by private companies but are not backed by any collaterals or physical assets.
Bibliography
a detailed list of all the sources consulted and cited in a research paper or project
Warranty vs. Guarantee
A guarantee is a promise that something is of good quality and will perform the way it is intended to. A warranty is an assurance issued to the consumer, which is attached to a product.
Commercial Bank vs. Investment Bank
investment banks typically raise money by selling securities (like stocks and bonds). On the other hand, commercial banks use consumer deposits to fund loans and mortgages, and the interest on those loans becomes profit for the bank.
Ownership Investments
things you buy while expecting an appreciation in value; stocks, real estate, precious objects, and businesses
Lending Investments
debts you buy, expecting to be repaid; bonds, certificates of deposit, and Treasury Inflation-Protected Securities (TIPS)
Good Debt
debt the helps put you in a better position; taking out a mortgage, buying things that save you time and money, buying essential items, investing in yourself by borrowing for more education or to consolidate debt
Store-Value Card
gift card
Human Capital
the skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country
money
any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context
elements of capitalism
private ownership, the motive for profit, the ability for businesses to compete in the free market, and minimal intervention in government
voluntary exchange
the act of buyers and sellers freely and willingly engaging in market transactions
equity
or economic equality, is the concept or idea of fairness in economics, particularly in regard to taxation or welfare economics
factors of production
land, labor, capital, entrepreneurship
market value
how much something is worth in a competitive marketplace
CPI
consumer price index; measures inflation and purchasing power; measures the average change in price over time of a market basket of consumer goods and services
components of GDP
consumption, investment, government expenditure, net exports
“Investment” in GDP
purchase of new capital goods
“consumption” in GDP
private consumption expenditures by households and non-profit organizations
capital stock
value of a company’s shares held by outside investors
GNP
gross national product; value of all products and services produced by the citizens of a country both domestically, and internationally
NDP
net domestic product; gross domestic product minus depreciation on a country’s capital goods
NI
national income; the money value of all the final services and goods produced in an economy during a given period of time. It includes the incomes of all factors of production, such as rent, wages, profits, and interest
PI
personal income; personal income refers to the total earnings of an individual from various sources such as wages, investment ventures, and other sources of income
NI vs. PI
Personal income refers to the money received by factors of production, whereas national income represents the income generated by these factors
DI
disposable income; income minus taxes
absolute advantage
The ability of an actor to produce more of a good or service than a competitor
comparative advantage
The ability of an actor to produce a good or service for a lower opportunity cost than a competitor
balance of trade
difference between a country’s imports and exports
Currency appreciation and depreciation
value of currency increases or decreases over time
monopolistic competition
a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another and hence are not perfect substitutes (Restaurants, hair salons, household items, and clothing)
oligopolistic competition
a competitive situation in which there are only a few sellers (of products that can be differentiated but not to any great extent); each seller has a high percentage of the market and cannot afford to ignore the actions of the others (automobiles, airlines, pharmaceuticals)
imperfect competition
the situation prevailing in a market in which elements of monopoly allow individual producers or consumers to exercise some control over market prices (includes monopolies and oligopolies)
perfect competition
market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers (agricultural markets, foreign currency exchange markets)
monopsony
market structure with only one buyer (U.S. government, miners in mining towns)
antitrust laws
prohibit conduct by a single firm that unreasonably restrains competition by creating or maintaining monopoly power
stock market
process and facilitation of investors buying and selling stocks with one another
stock exchange
the actual intermediary that connects buyers with sellers (NYSE)
stock index
numerical representation of a group of stocks that is used to track their collective performance (S&P 500, Dow Jones, Nasdaq)
Who controls interest rates?
The Federal Reserve
Income tax
levied by federal and most state governments; “progressive”
Sales tax
levied by state governments; “regressive”
Property tax
levied by local governments; “regressive”
Excise tax
Excise taxes are taxes imposed on certain goods, services, and activities. Taxpayers include importers, manufacturers, retailers, and consumers, and vary depending on the specific tax (can be levied by federal, state, and local governments)
Specific tax
refers to the excise tax imposed which is based on weight or volume capacity or any other physical unit of measurement
Ad Valorem or Value-added tax
refers to the excise tax which is based on selling price or other specified value of the goods/articles
Monetary policy
revising interest rates and changing bank reserve requirements (controlled by the Fed)
When the Fed lowers interest rates…
financial institutions can procure funds at low interest rates. This enables them to reduce their lending rates on loans to firms and households.
fiscal policy
the use of government taxing and spending to influence a country’s economy; influences aggregate supply and demand (controlled by the executive and legislative branch) (two main tools of fiscal policy are taxes and gov’t spending)
Expansionary fiscal policy
increases aggregate demand directly through an increase in government spending (“loose”)
reserve ratio/reserve requirement
sets the minimum amount that a commercial bank must hold in liquid assets
open market operations
the purchase and sale of securities in the open market by a central bank to manage the money supply
Discount rate/bank rate
rate of interest which a central bank charges on its loans and advances to a commercial bank
Corporation
a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law, limited liability (Double tax: The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends)
sole proprietorship
(unlimited personal liability) (self-employment tax, income tax)
partnership
(Unlimited personal liability unless structured as a limited partnership)(Self-employment tax (except for limited partners, income tax) (no more than 50 members)
Limited liability company (LLC)
(One or more people) (Owners are not personally liable) (Self-employment tax, Personal tax or corporate tax)
Non-profit corporation
(Tax-exempt, but corporate profits can’t be distributed)
labor union
organization of workers intent on “maintaining or improving the conditions of their employment (“organized labor”)
circular flow model
model of the economy in which the major exchanges are represented as flows of money, goods and services, etc. between economic agents. The flows of money and goods exchanged in a closed circuit correspond in value, but run in the opposite direction.
4 factors of production
land, labor, capital, entrepreneurship
business cycle
expansion, peak, contraction, and trough
production possibility frontier
illustrates the possible quantities that can be produced of two products if both depend upon the same finite resource for their manufacture
brokerage firm
middleman who connects buyers and sellers to complete a transaction for stock shares, bonds, options, and other financial instruments
capital deepening
capital per worker is increasing
capital widening
situation where the stock of capital is increasing at the same rate as the labor force and the depreciation rate, thus the capital per worker ratio remains constant
money growth
an increase in the amount of money in an economy; money supply
lagging economic indicator
an economic statistical indicator that changes after macroeconomic conditions have already changed
elasticity
measures change in quantity relative to change in PRICE
Earned Income Tax Credit
a federal tax credit for working people with low and moderate incomes; It boosts the incomes of workers paid low wages while offsetting federal payroll and income taxes
HMO/Health Maintenance Organization
delivers all health services through a network of healthcare providers and facilities; least freedom to choose providers; require referal to see a specialist
PPO/Preffered Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; Higher out-of-pocket costs if you see out-of-network doctors vs. in-network providers
EPO/Exclusive Provider Organization
A moderate amount of freedom to choose your health care providers – more than an HMO; you do not have to get a referral from a primary care doctor to see a specialist; No coverage for out-of-network providers; Lower premium than a PPO
POS/Point of Service Plan
blends features of an HMO with a PPO; You can see in-network providers your primary care doctor refers you to. You can see out-of-network doctors, but you’ll pay more.
Transitional Employment
a strategy that places individuals in temporary jobs with the goal of preparing them for permanent job placement. Transitional employment is offered to unemployed or underemployed individuals who need help integrating back into the workforce
Affirmative Action
the practice or policy of favoring individuals belonging to groups regarded as disadvantaged or subject to discrimination; reverse discrimination
Equal Employment Opportunity
refers to fair, unbiased treatment in the workplace; creates a culture that doesn’t accept any kind of discriminatory behavior
Civil Rights Act
prohibits discrimination against women and minorities in the workplace
Americans with Disabilities Act/ADA
prohibits discrimination against people with disabilities in several areas
SMART Goals
Specific, Measurable, Achievable, Relevant, and Time-Bound
OSHA/Occupational Safety and Health Administration requirements
Prevent workplace injuries and illnesses
Pre-tax Deductions
any money taken from an employee’s gross pay before taxes are withheld from the paycheck (Medical and dental benefits, 401(k) retirement plans, group term life insurance)
FICA/Federal Income Contributions Act
mandatory payroll taxes; Social Security (6.2%) and Medicare (1.45%); employee and employer each pay 7.65%
Group Term Life Insurance
provides term life insurance as a benefit to eligible, enrolled employees or group members of an organization at a lower cost than what they would pay for an individual term life policy
Mandatory/Statutory Benefits
medicare and social security contributions, worker’s compensation insurance, unemployment insurance and, under some state and local laws, paid sick leave; applicable large employers (50 or more employees) must also offer health insurance and family/medical leave
Affordable Care Act (Obamacare)
increases health insurance coverage for the uninsured and implements reforms to the health insurance market
Discretionary/Fringe Benefits
various types of non-wage compensation provided to employees in addition to their normal wages or salaries; not required by law (tuition assistance, childcare reimbursement, cafeteria subsidies)
Salary Schedule
a system that determines how much an employee is paid dependent on the employee’s rank or status and the employer’s salary structure with grades that define the range of pay for an employee
Variable Pay
the portion of sales compensation determined by employee performance; incentive pay
Comparable Worth
concept aimed at leveling out salaries based on a job’s value, or worth, to a company; Equal Pay for Equal Work
Broad banding
(a pay structure that consolidates a large number of narrower pay grades into fewer bands with wider salary ranges
Strategic Compensation
strategies that help companies manage the total employee compensation while ensuring growth, equity, and transparency
Piecework Plan
paying an employee a fixed pay rate for each unit they produce
Merit/Incentive Pay
provides base-pay increases or bonuses for workers who perform their jobs effectively
Employee Rewards/Recognition Programs
a system that an organization sets up to celebrate employee successes in an open forum and reward them with monetary and non-monetary perks for meeting goals or embodying core values
Pay Rate
money received divided by hours worked
Team-Based Compensation
financially compensates employees for the goals they meet as a collective group, rather than as individuals (bonuses)
Coaching vs. Counseling
Coaching accepts existing performance and looks forward to even better performance from the employee. Counseling looks back at unacceptable performance to instruct an employee to reach satisfactory performance in the future
Active Listening
listen attentively to a speaker, understand what they’re saying, respond and reflect on what’s being said, and retain the information for later
Appraisal
the process of assessing an employee’s job performance and determining his or her suitability for future assignments
360-Degree Feedback
assessment system or process in which employees receive confidential, anonymous evaluations from the people who work around them (subordinates, peers, colleagues, and supervisor)
Personnel Law/Labor Law
mediate the relationship between workers, employing entities, trade unions, and the government
IRCA/Immigration Reform and Control Act
prohibits employers from knowingly hiring, recruiting, or referring for a fee any alien who is unauthorized to work
Exempt Employees
usually hold administrative, professional, or executive positions. They’re “exempt” from the Fair Labor Standards Act overtime regulations and, therefore, not entitled to overtime pay
Non-exempt Employees
typically paid hourly and perform more manual or technical duties, entitled to overtime pay
Negligent Hiring
The employer did not exercise reasonable care in hiring the employee, and now the employee has done something illegal
Fair Labor Standards Act/FLSA
creates the right to a minimum wage, and “time-and-a-half” overtime pay when people work over forty hours a week for non-exempt employees; it also prohibits employment of minors in “oppressive child labor”
ADEA/Age Discrimination in Employment Act
protects certain applicants and employees 40 years of age and older from discrimination on the basis of age in hiring, promotion, discharge, compensation, or terms, conditions or privileges of employment; prohibits involuntary retirement
Family and Medical Leave Act
requiring covered employers to provide employees with job-protected, unpaid leave for qualified medical and family reasons
Worker Adjustment and Retraining Act
protects employees, their families, and communities by requiring most employers with 100 or more employees to provide notification 60 calendar days in advance of planned closings and mass layoffs of employees
Older Worker Benefit Protection Act
prohibits age discrimination in the provision of fringe benefits, such as life insurance, health insurance, disability benefits, pensions, and retirement benefits
Employee Retirement Income Security Act/ERISA
sets standards to protect the interests of employee benefit plan participants and their beneficiaries
Wagner Act/National Labor Relations Act
guarantees the right of private sector employees to organize into trade unions, engage in collective bargaining, and take collective action such as strikes
Taft-Hartley Act/Labor Management Relations Act
outlawed closed shops, giving workers the right to decline to join a union. It permitted union shops only if a majority of employees voted for them
Privacy Act of 1974
governs the collection, maintenance, use, and dissemination of personally identifiable information about individuals that is maintained in systems of records by federal agencies; require employers to let their employees know before any of their personal data is collected or processed
Telecommuting
employees working from their own homes or other remote locations, connecting with coworkers via online platforms; remote work
Job Sharing
an employment arrangement where two people, or sometimes more, are retained on a part-time or reduced-time basis to perform a job normally fulfilled by one person working full-time. This leads to a net reduction in per-employee income
Flexible Scheduling
allows employees a level of autonomy to create their own schedules and find a work-life balance that works for them
Open-Shop
a workplace that allows incoming recruits and existing employees to elect whether to join a union, rather than making it a requirement for employment
Closed-Shop
employer agrees to hire union members only, and employees must remain members of the union at all times to remain employed
Binding Arbitration
a form of dispute resolution in which the involved parties submit their arguments and evidence to a neutral arbitrator who reviews it, and then makes a final, legally binding decision on behalf of the parties
Impasse
occurs when the two sides negotiating an agreement are unable to reach an agreement; deadlock
Labor Strike
work stoppage caused by the mass refusal of employees to work
Screening
process used to determine a job applicant’s qualifications and potential job fit for a position to which they have applied; comes in right after candidate sourcing and involves skimming through resumes and cover letters
5 Cs of Communication
Clear, concise, complete, cohesive, courteous
Reference Manual
intended to assist users in using a particular product, service or application.
Periodical
anything that comes out periodically. Magazines, newspapers, and journals
Encyclopedia
a book or set of books giving information on many subjects
Skimming Vs Scanning
Skimming is reading rapidly in order to get a general overview of the material. Scanning is reading rapidly in order to find specific facts.
Functions of Money
store of value, unit of account, and medium of exchange
Time Value of Money
states the value of a dollar today is worth more than the value of a dollar in the future (due to investment)
Gross Wages
the full amount an employee earns before taxes and other deductions are withheld from the paycheck
Year-to-date Earnings
the amount of money an individual has earned from Jan. 1 to the current date
Installment Loan
a type of agreement or contract involving a loan that is repaid over time with a set number of scheduled payments
Average APR rate for credit cards
20%
Typical interest rate on a savings account
0.6%
Average interest on a money market account
between 0.01% APY and 3.45% APY, depending on your balance.
529 plan
A tax-advantaged savings plan designed to help families save money for future educational costs. There are two types of 529 plans: 529 prepaid tuition plans and 529 savings plans.
Closed-loop prepaid card
can only be used at certain locations
Credit Report
summary of your credit activity and current credit situation such as loan paying history and the status of your credit accounts
Debt Consolidation
your various debts, whether they are credit card bills or loan payments, are rolled into a new loan with one monthly payment
Earned Income
Money made from working for someone who pays you or from running a business or farm. This includes all the income, wages, and tips you get from working.
Foreign Transaction Fee
A fee your card provider charges when you use your prepaid card in a foreign country or to pay in a foreign currency
Grace period
The number of days you have to pay your bill in full before finance charges start
HSA/Health Savings Account
A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses.
Interest Capitalization
occurs when unpaid interest is added to the principal amount of your student loan
Mail Fraud Scam
Letters that look real but contain fake promises
Maturity Date
The date that an investor’s investment is to be paid back in full in accordance with its agreement
Military Lending Act (MLA)
A federal law that provides special protections for active duty servicemembers, like capping interest rates on many loan products.
Open-loop prepaid card
This type of card has a network logo on it. Examples of networks are Visa, MasterCard, American Express, and Discover. These cards can be used at any location that accepts that card type. Most prepaid cards are open-loop cards.
Overdraft
An overdraft occurs when you don’t have enough money in your account to cover a transaction, but the bank pays the transaction anyway.
Pay Period
The amount of time that an employee works before being paid — for example, a week or a month.
Prepayment Penalty
A fee lenders can charge borrowers if they pay off a loan early.
Public Service Announcement
An announcement or message delivered, often on radio or television, for the good of the public.
Rebate
A rebate reduces the price of consumer goods. Most rebates require consumers to pay the full cost of an item at the time of purchase, then to send documentation to the manufacturer or retailer to receive a rebate by mail.
Spoofing
When a caller disguises the information shown on your caller ID to appear as though they are calling as a certain person or from a specific location.
Tax Credit
A dollar-for-dollar reduction in a tax. It can be deducted directly from taxes owed.
Tax Deduction
An amount (often a personal or business expense) that reduces income subject to tax.
Underbanked
A person who has an account at a bank or credit union, but also uses an alternative financial service like a payday loan, check cashing, or a pawn shop loan.
Unearned Income
Income people receive even if they don’t work for pay. Can include things like children’s allowances, stock dividends paid by corporations, and financial gifts.
Finance Charges
the interest paid on unpaid credit balances
Witholding
Employer deductions from employees’ earnings to pay employees’ taxes.
What is the Social Security tax rate for employers, employees, and self-employed people?
Employers: 6.2%
Employees: 6.2%
Self-Employed: 12.4%
Work Credits
Used by the government to determine eligibility for SS, SSDI, and medicare; a person earns a credit for a certain amount earned in wages, up to 4 credits a year (40 credits needed to retire w/ SS)
SNAP/Supplemental Nutrition Assistance Program
food stamps/food-purchasing assistance for low & now income people (eligibility and benefits vary by state)
Who pays income taxes?
Employees only
Who pays payroll taxes?
Employers & employees
Property Tax
Tax on the value of a property
What taxes does the federal government collect?
Income taxes, payroll taxes
What taxes does the state government collect?
property taxes, sales taxes, income taxes (in most states)
Nonrefundable Tax Credit
can only reduce tax liability to zero
Refundable Tax Credit
results in a tax refund if the amount owed is below zero
Lease Term
period of time in which a contracted lease is in place
Consumer Financial Protection Beureau
protects consumers from unfair, deceptive, or abusive practices and taakes action against companies that break the law
FDIC
Federal Deposit Insurance Corporation; insures bank accounts up to $250,000 per depositor
NCUA
National Credit Union Adminsitration; insures credit union accounts up to $250,000 per depositor
Solvencey Regulations
regulates the requirements for risks that insurance companies take
Education Savings Account
investment account that helps pay for educational expenses
Traditional IRA
allows earnings to grow tax deffered; pay taxes upon withdrawal
Roth IRA
deposit after-tax earnings; don’t pay taxes upon withdraw
Coupon Interest Rate
interest paid on a bond
Blue-chip stock
stocks of well-known, high-quality companies that are industry leaders
What type of relationship exists between stock prices and bond prices?
when stock prices rise, bond prices fall
What is considered a long-term goal?
more than 1 year
What is considered a short term goal
less than 1 year
Allocation vs. Diversification
asset allocation refers to the percentage of stocks, bonds, and cash in your portfolio, diversification involves spreading your assets across asset classes within those three buckets
RFID
Radio-frequency identification uses electromagnetic fields to automatically identify and track tags attached to objects
Large-Cap company, Small-Cap company
large market capitalization vs. small market capitalization
50-30-20 Rule
50% on needs
30% on wants
20% to savings
Tax exemption
excludes certain income, revenue, or even taxpayers from tax altogether
Deduction vs. exemption
Claiming a tax deduction reduces your taxable income, lowering the tax amount you owe. Tax exemptions: A tax exemption is like a deduction. Exemptions allow you to exclude the tax exemption amount from your income.
How do dependents relate to tax liability
they are considered as deductions/exemptions
Negotiable Instrument
a signed document that promises an amount to be paid to a specified person or assignee
FDA vs. USDA
The FDA sets the rules for almost all the foods we eat. The USDA sets the rules for meat products, poultry products, and egg products.
Co-insurance clause
ensures policyholders insure their property to an appropriate value and that the insurer receives a fair premium for the risk. Coinsurance is usually expressed as a percentage.
Indemnification
compensation for harm or loss
Bank Draft
a cheque provided to a customer of a bank or acquired from a bank for remittance purposes; guarantees payment by the issuing bank after verifying the requesting customer has enough funds to cover it
Credit freeze
locks the data at the consumer reporting agency until the individual gives permission for the release of the data
Itemized deduction
eligible expenses that individual taxpayers can claim on federal income tax returns and which decrease their taxable income (mortgage interest, state or local income taxes, property taxes, medical or dental expenses in excess of AGI limits, or charitable donations)
AGI Limit (adjusted gross income)
Once a taxpayer’s income exceeds a certain threshold the amount of itemized deductions that can be claimed is limited
Adjusted Gross Income
total income minus deductions, or “adjustments”
Convertible Bond
a fixed-income debt security that pays interest, but can be converted into common stock or equity shares.There are several risks.
Earnings per share
the portion of a company’s profit allocated to each outstanding share of common stock, serving as a profitability indicator
P/E Ratio
share price/earnings per share
measures a company’s current share price relative to its per-share earnings
Bodily Injury vs. Medical Payments Coverage
Bodily injury liability coverage applies to injuries you or anyone insured under your policy becomes legally responsible for as a result of an accident. Medical payments coverage pays for reasonable medical expenses incurred by you or passengers in your vehicle regardless of who is at fault for the accident.
APR vs. APY
APR represents the total yearly cost of borrowing money, expressed as a percentage, and includes the interest you pay on a loan. APY refers to the total amount of money you earn on a savings account or other investment, taking into account compound interest.
Tax Allowance
reduces the amount of money that’s withheld from your paycheck. You can claim allowances on Form W-4.
5 Cs of Lending
character, capacity, capital, collateral, and conditions
How to read auto liability coverage
limit per person for bodily injury in an accident / total limit per accident for bodily injury / limit per accident for Property Damage
Investor life cycle
accumulation, consolidation, pre-retirement, retirement, and legacy
describes different life stages and corresponding financial goals and priorities for each one
Investment horizon
a term used to identify the length of time an investor is aiming to maintain their portfolio before selling their securities for a profit.
Phishing
a fraudulent operation by which an e-mail user is duped into revealing personal or confidential information which can be used for illicit purposes
Restrictive endorsement
a conditional guaranty of a transfer of a negotiable instrument. That is, an endorsement that takes effect only on the occurrence or non-occurrence of another act or event
Endorsement
promise that the institution/employer will honor a check or other negotiable instrument received from a customer (ex. signing a check)
Prime Rate
interest rate used by banks, usually the interest rate at which banks lend to customers with good credit
Federal Funds Rate
the interest rate at which depository institutions lend reserve balances to other depository institutions overnight on an uncollateralized basis
No-fault insurance
any type of insurance contract under which the insured party is indemnified by their own insurance company for losses, regardless of the source of the cause of loss
FICO Score
3-digit number (300-850) based on your credit reports
Amoritization Schedule
a table detailing each periodic payment on an amortizing loan, as generated by an amortization calculator.
Ponzi Scheme
a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors
Call date
a day on which the issuer has the right to redeem a callable bond at par, or at a small premium to par, prior to the stated maturity date
Close-ended credit
a type of credit that should be repaid in full amount by the end of the term, by a specified date (opposite of revolving, loans)
MSRP
The list price, also known as the manufacturer’s suggested retail price, or the recommended retail price
Dollar-cost averaging
the practice of investing a fixed dollar amount on a regular basis, regardless of the share price
Buy and hold
investment strategy in which an investor buys stocks and holds them for a long period regardless of fluctuations in the market
Buying on Margin
borrowing money from a broker to purchase stock
Stock split
when a company increases the number of its outstanding shares of stock to boost the stock’s liquidity
Teaser rate
introductory rate; an interest rate charged to a customer during the initial stages of a loan
Pharming
directing internet users to a bogus website that mimics the appearance of a legitimate one, in order to obtain personal information such as passwords, account numbers, etc.
What is the federal minimum wage?
$7.25
Defined contribution plan
a type of retirement plan in which the employer, employee or both make contributions on a regular basis
Defined benefit plan
a type of pension plan in which an employer/sponsor promises a specified pension payment, lump-sum, or combination thereof on retirement that depends on an employee’s earnings history, tenure of service and age, rather than depending directly on individual investment returns.
Defined contributions vs defined benefit
A defined contribution plan does not promise a specific amount of benefits at retirement.
Loss aversion theory
a phenomenon where a real or potential loss is perceived by individuals as psychologically or emotionally more severe than an equivalent gain
Yield vs. Capital Gain
current yield provides an immediate return on investment through regular interest or dividend payments, capital gains refer to the increase in the value of an investment over time
For how long are transactions kept on credit reports?
7 years
Student Loan deferment vs. forbearance
During a deferment, interest doesn’t accrue on some types of Direct Loans. During a forbearance, interest accrues on all types of Direct Loans.
CD vs. MMA
In general, a money market account is more liquid than a CD. In fact, most CDs have early withdrawal penalties, while money markets do not. That said, a CD will often pay a higher interest rate, because your funds are committed to that bank or credit union.
Layaway
a purchase agreement in which the seller reserves an item for a consumer until the consumer completes all the payments necessary to pay for that item, and only then hands over the item
ATM Card
a dedicated payment card card issued by a financial institution which enables a customer to access their financial accounts via its and others’ automated teller machines (seperate from a debit/credit card)
Risk Pyramid
a portfolio strategy that allocates assets according to the relative risk levels of those investments
Stock Screener
powerful tools that allow investors to filter and analyze stocks based on specific criteria, streamlining the process of identifying investment opportunities
Limit Order
an order to buy or sell a stock with a restriction on the maximum price to be paid (with a buy limit) or the minimum price to be received (with a sell limit)
Market Order
an order to buy or sell a stock at the market’s current best available price. A market order typically ensures an execution, but it doesn’t guarantee a specified price.
Stop Order
an order to buy or sell a stock at the market price once the stock has traded at or through a specified price (the “stop price”). If the stock reaches the stop price, the order becomes a market order and is filled at the next available market price.
Components of Homeowners Insurance
Coverage A: Structure (the dwelling itself)
Coverage B: Other structures (sheds and fences)
Coverage C: Personal property (contents of the structures)
Coverage D: Loss of use (Additional Living Expense or ALE)
Coverage L: Personal Liability
Coverage M: Medical Payments to Others
Charge Card vs. Credit Card
a charge card’s balance often has to be paid in full each month.
COD/ Cash on delivery
when a buyer pays for goods or services once they are received
Pre-approval
Both pre-qualified and pre-approved mean that a lender has reviewed your financial situation and determined that you meet at least some of their requirements to be approved for a loan. Getting a pre-qualification or pre-approval letter is generally not a guarantee that you will receive a loan from the lender.
Savings/loan association
a financial institution that specializes in accepting savings deposits and making mortgage and other loans.
How do pawnshop loans work?
You bring in an item as collateral, and the pawnbroker will determine the value of the item, give you a loan based on its cost, and then hang on to your collateral until you’ve paid off the loan within the specified timeframe; if you don’t, the pawnbroker can sell your item. In a nutshell, it is one way to get a personal loan without a credit check.
Credit counseling service
Credit counseling organizations can advise you on your money and debts, help you with a budget, develop debt management plans, and offer money management workshops. Working with a credit counselor can be a great way of getting free or low-cost financial advice from a trusted professional.
Actual cash value
calculated by taking the replacement cost value of property and subtracting the depreciation from it
Replacement value
the amount of money that it would cost to replace something that is damaged, lost, stolen, etc.
Public vs. Private Companies
Private companies are owned by founders, executive management, and private investors. Public companies are owned by members of the public who purchase company stock as well as personnel within companies (founders, managers, employees) who possess shares of company stock as a result of the IPO and purchases.
Securities Investor Protection Corporation (SIPC)
insures brokerage accounts up tp $500,000
Zero-based budgeting
income-expenses=0
Which financial agency was established after the stock market crash of 1929 that led to the Great Depression?
FDIC
Agressive vs. conservative investing
An aggressive investor commonly has a higher risk tolerance and is willing to risk more money for the possibility of better, yet unknown, returns. A conservative investor commonly has a lower risk tolerance and seeks investments with guaranteed returns.
Common vs. preferred stock (rate of return)
Common stock investments have a potentially larger reward, but also come with more risk because they’re exposed to the market. Preferred stock investments are a safer investment with fixed-income dividends, but investors may miss out on a share’s appreciation they would get with common stock.
Allocation vs Diversification
asset allocation is the equivalent of deciding how many of your eggs you’re going to put into how many different baskets—or asset classes. Diversification is the spreading of your investments both among and within different asset classes.
501(c)(3) Organization
Tax-exempt non profit organization
Job vs. career vs. occupation
A job is what you come to work for; a career is what you do for a living and includes your education, training, professional memberships, volunteering, and your entire history of paid work. An occupation is a type of work that includes tasks, education and training, typical wages, work settings, and other factors.
Cover Letter
a short introduction to you that concisely communicates your interest in a job opportunity along with your top skills and relevant experience
ESG Stocks (environment, social and governance)
type of ethical investing strategy helps people align investment choices with personal values; ESG investors aim to buy the shares of companies that have demonstrated a willingness to improve their performance in these three areas
Appendix
A section at the end of a paper that includes information that is too detailed for the text of the paper itself and would “burden the reader” or be “distracting,” (figures, tables, maps, photographs, raw data, computer programs, musical examples, interview questions, sample questionnaires)
Financial Industry Regulatory Authority (FINRA)
private American corporation that acts as a self-regulatory organization; has power to take diciplinary action against individuals or brokerage firms that violate the industry’s rules
US. Consumer Financial Protection Bureau
regulates offerings of consumer financial products and maintains a compliant database
Federal Trade Commision (FTC)
government agency; protects public from unfair and deceptive practices in advertising
Securities and Exchange Commision (SEC)
protects investor and safeguards the integrity of the security market
Easy access credit
bank provides a line of credit to automatically replenish bank account balances
Are mutual funds insured?
Mutual funds are not insured by the FDIC because they do not qualify as financial deposits and carry a certain amount of risk that the investor opts in to bear.
Are money market accounts insured?
like other deposit accounts, money market accounts are insured by the FDIC or NCUA
Are corporate bonds insured?
no; corporate bonds are guaranteed only by the companies who issue them
Vesting
Once you’re fully vested, the full value of your employer’s contributions are yours
Can credit be offered to non-citizens?
A non-U.S. citizen can get a personal loan, but eligibility requirements vary by lender and it’s generally tougher than if you were a citizen. Some lenders may consider non-citizens high-risk borrowers based on two factors: the duration of their stay in the country and a potential lack of credit.
How often should you request a copy of your credit report?
annually
Affinity Fraud
Affinity fraud is a form of investment fraud in which the fraudster preys upon members of identifiable groups, such as religious or ethnic communities, language minorities, the elderly, or professional groups
Target-date retirement fund
an age-based retirement investment that helps you take more risk when you’re young and gets more conservative over time
Discount broker
a stockbroker who carries out buy and sell orders with little or no commissions; do not provide the investment advice or guidance provided by a full-service broker. Discount online brokers compose a large section of the fintech industry.
Subsidized student loans
don’t accrue interest while a borrower is in school at least half-time or during a six-month grace period after leaving school.
Hard vs. Soft Credit Inquiry
a soft inquiry occurs when someone is only seeking credit information about you but not looking into making you a loan (does not impact credit; landlords, employers, insurance agencies)
hard inquiry happens when a lender is deciding whether to make you a loan (brings down credit)
Copay vs. coinsurance
A copay is a set rate you pay for prescriptions, doctor visits, and other types of care. Coinsurance is the percentage of costs you pay after you’ve met your deductible.
Employee Assistance Program/EAP
voluntary, work-based program that offers free and confidential assessments, short-term counseling, referrals, and follow-up services for employees
Occupational Segregation
people of different races and genders are unevenly represented in different kinds of jobs, which have very different wages, benefits and working conditions
Wage Penalty
A difference in wages, often between men and women, even when education, occupation, and experience are the same for both employees.
Motherhood Penalty
phenomenon where mothers compared to non mothers earn less and are discriminated in workplace
Job Polarization
the increasing concentration of employment in the highest- and lowest-wage occupations, as jobs in middle-skill occupations disappear
SSI vs. SSDI
SSI determination is based on age/disability and limited income and resources, whereas SSDI determination is based on disability and work credits
Supplemental Security Income/SSI
monthly payments to people with disabilities and older adults who have little or no income or resources
Social Security Disability Insurance/SSDI
provide monthly benefits to people who have a medically determinable disability that restricts their ability to be employed
Unemployment Insurance/UI
a form of state-provided insurance that provides weekly payments to eligible workers
Tax Rates for Long vs. Short Term Capital Gains
Short-term capital gains taxes range from 0% to 37%.
Long-term capital gains taxes run from 0% to 20%
Remarketing
engaging audiences who have already interacted with your brand
Native Advertising
a form of paid advertising in which the ads match the look, feel and function of the media format where they appear. They fit “natively” and seamlessly on the web page.
Steering vs. Redlining
Steering is directing buyers based on their class. Redlining is generally the discrimination of buyers by the lending industry.
Digital Assets
anything in digital form with value, ownership, and usage rights (photos, manuscripts, documents, data, cryptocurrencies)
Uniform Gifts to Minors Act (UGMA) or Uniform Transfers to Minors Act (UTMA) accounts
accounts created under a state’s law to hold gifts or transfers that a minor has received
The adult custodian opens the account for a specific child. The adult can then add money to the account and choose investments. When the child reaches a certain age (generally between 18 and 25, varying by state), assets and control of the account must be transferred to them.
Opt-in vs. Opt-out Employee Retirement Plans
Opt-in retirement accounts require employees to actively choose to participate, while opt-out retirement accounts automatically enroll employees unless they opt out.
Types of Annuity Payments
periodic payments made over time as part of an annuity contract; Examples include immediate annuities, where payments start immediately, deferred annuities that accumulate value for future payments, fixed annuities with guaranteed payments, and variable annuities where payments depend on investment performance.
Yield Curve
a graphical representation of the interest rates on debt for a range of maturities. It shows the yield an investor is expecting to earn if he lends his money for a given period of time.
Risk Premium
the investment return an asset is expected to yield in excess of the risk-free rate of return; like hazard pay for your investments
Cash Equivalents
highly liquid investment securities that can be converted to cash easily
Fixed-income securities
investment that provides a return through fixed periodic interest payments and the eventual return of principal at maturity
Load Fund
A load fund entails mutual fund shares that carry a sales commission paid by the fund purchaser. Loads may be paid at time of purchase (front-load) or at time of sale (back-load), and are often paid to a broker or agent who sold the fund.
Student loan deferment vs. forbearance
Both deferment and forbearance allow you to temporarily postpone or reduce your federal student loan payments. During a deferment, interest doesn’t accrue on some types of Direct Loans. During a forbearance, interest accrues on all types of Direct Loans.
Direct Loan (student)
a student loan made directly by the U.S. Department of EducationTy
Types of Direct Loans
Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans
Direct PLUS Loans
federal loans that graduate or professional degree students or parents of dependent undergraduate students can use to help pay for education expenses; have large borrowing limits
Direct Consolidation Loans
allows you to consolidate (combine) multiple federal student loans into one loan with a single monthly payment
Expense Ratio
the cost of owning a mutual fund or ETF; A reasonable expense ratio for an actively managed portfolio is about 0.5% to 0.75%
Bid-Ask Spread
the amount by which the ask price exceeds the bid price for an asset in the market
Preferential Tax Rates for Capital Gains
The long-term capital gains tax rates are 0 percent, 15 percent and 20 percent, depending on your income.
Net Investment Income Tax (NIIT)
applies at a rate of 3.8% to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts
457 Plan
retirement savings option for state and local government employees and some nonprofit workers. It functions like a 401(k) plan
Roth 401(k)
an employer-sponsored retirement savings account that is funded with post-tax money. Withdrawals in retirement are tax-free.
Mental Accounting
refers to the different values a person places on the same amount of money, based on subjective criteria, often with detrimental results.
Fiduciary Duty
the legal responsibility to act solely in the best interest of another party
Home-Equity Loan
a type of loan in which the borrowers use the equity of their home as collateral. The loan amount is determined by the value of the property, and the value of the property is determined by an appraiser from the lending institution.
College-Level Examination Program (CLEP)
series of tests you can take to earn college credit for your undergraduate degree; each exam is $93
Entrance Counseling (student loans)
required to help borrowers understand their responsibilities in taking out a loan; required to obtain a federal student loan
Master Promissory Note (student loans)
a legal document in which you promise to repay your loan(s) and any accrued interest and fees to the U.S. Department of Education; required to obtain a federal student loan
Rate-shopping window
FICO scores offer a 45-day window for rate shopping, and VantageScore uses 14 days (“prequalification” process doesn’t affect your credit at all)
Peer-to-peer (P2P) lending
allows people to lend or borrow money from one another without going through a bank (ex. Kickstarter)
Rent-to-Own
a type of legally documented transaction under which tangible property, such as furniture, engagement rings, and real property, is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement.
Underbanked
a characteristic describing people or organizations who do not have sufficient access to mainstream financial services and products typically offered by retail banks and thus often deprived of banking services such as credit cards or loans
How is APR Calculated
Unique to credit cards, interest is calculated daily, meaning that a credit card company charges borrowers by multiplying the ending balance by the APR and then dividing by 365. The amount of interest charged is subsequently added to the outstanding balance the following day.
How to read auto insurance coverage
Liability coverage limits for different types of vehicles are typically represented by three numbers, e.g. 25/50/25. These numbers represent how much you’re covered for bodily injury per person ($25,000), bodily injury per accident ($50,000), and property damage per accident ($25,000).
Professional Negligence
harm or injury caused by a business’s failure to take reasonable care
Are debts discharged after death?
When someone dies, their debts are generally paid out of the money or property left in the estate. If the estate can’t pay it and there’s no one who shared responsibility for the debt, it may go unpaid. Generally, when a person dies, their money and property will go towards repaying their debt.
Internet Crime Complaint Center
(IC3)
the Nation’s central hub for reporting cyber crime; run by the FBI
