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Personal Finance 4 Flashcards

1
Q

Emergency fund

A

Amount of money you can attain quickly in case of immediate need

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2
Q

How long should your emergency fund last?

A

3 months

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3
Q

What is line of credit?

A

A short term loan that is approved before the money actually needed

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4
Q

What is speculative investment?

A

A high risk investment made in the hope of making a large profit in a relatively short amount of time

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5
Q

What are components to the risk factors?

A

Inflation
Interest Rate
Business Failure
Market

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6
Q

What is liquidity?

A

The ability to buy or sell an investment quickly without substantially affecting the investments value

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7
Q

What is asset allocation?

A

The process of spreading your assets among several different types of investments to lessen risk

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8
Q

How do you allocate your money based on need!

A

More conservative more bonds
Moderate evenish split
Aggressive you’ll take more stocks

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9
Q

What is a government bond?

A

Written pledge of a gvnt or a municipality to repay a specific sum of money, along with interest

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10
Q

What is a municipal bond?

A

A debt security issued by state or local government

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11
Q

What is a general obligation bond?

A

A bond backed by the full faith, credit and ultimate taxing power of the government that issued it

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12
Q

What is a revenue bond?

A

A bond that is repaid from the income generated by the project it is designed to finance

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13
Q

What is the equation for taxable equivalent yield?

A

X=Tax exempt yield/(1.0-tax rate)

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14
Q

What is a corporate bond?

A

A corporations written pledge to repay a specified amount of money with interest

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15
Q

Face value?

A

Dollar amount the bond holder will receive at the bonds maturity

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16
Q

Maturity date

A

Date which money is repayed

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17
Q

Bond indenture

A

Document that details conditions relating to a bond issue

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18
Q

Trustee

A

Independent firm that acts as the bond holders representative

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19
Q

Debentures

A

Bond backed only by reputation of company issueing it

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20
Q

Mortgage bond

A

Corporations bond secured by various assets of the issuing firm

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21
Q

Convertible bonds

A

Bond that can be exchanged at the owners option, for a specified number of shares of the corporations common stock

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22
Q

Call feature

A

Firms can buy outstanding bonds before maturity date

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23
Q

Sinking fund

A

A fund where annual or semi annual deposits are made for the Purpose of redeeming a bond issue

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24
Q

Serial Bonds

A

Bonds of a single issue that mature on different days

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25
Registered bond
A bond that is registered in the owners name by the issuing company
26
How to calculate amount of annual interest?
X=face value-Interest Rate
27
Registered coupon bond
A bond that is Registered for principal only, not for interest
28
How to find approximate market value?
X=Dollar amount of annual interest/Comparable interest rate
29
How to find current price if a bond?
X=Bond price quotations X face value
30
What is current yield?
X=Annual Interest Amount/Current Price
31
Common stock
Most basic form of corporate ownership
32
Equity financing
Money received from the owners or from the sale of shares of ownership in a business
33
Dividend
Distribution of money, stock, or other property that a corporation pays to stockholders
34
Proxy
Legal form that lists the issues to be decided at a stockholders meeting and requests that stockholders transfer their voting rights to score some individual or individuals
35
Record date
The date on which a stockholder must be registered on the corporations books in order to receive a dividend payment
36
Stick split
A procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares
37
Preferred stock
Type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends
38
How to calculate earnings per share?
X=earnings/number of shares outstanding
39
Price earnings ratio
X=price per share/Earnings per share
40
How to calculate dividend yield
X=annual dividend amount/current price per share
41
Calculate total return
X=Dividends+Capital Gains
42
Calculate Book Value
X=(assets-liabilities)/number of shares outstanding
43
Stock market value
Situation in which stocks are trading at prices above their actual worth
44
Primary Market
A market in which an investor purchase ms financial securities, via an investment bank or other representative, from the issuer of those securities
45
Investment Bank
Financial firm that assists corporations in raising funds, usually by helping to sell new security issues
46
Initial Public offering
Occurs when a corporation sells stock to the general public for the first time
47
Secondary market
A market for existing financial securities that are currently traded among investors
48
Securities exchange
A market place where member brokers who represent investors meet to buy and sell securities
49
Specialists
Buys or sells a particular stock in an effort to maintain an orderly market
50
Over the counter market
A network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange
51
Nasdaq
An electronic marketplace for stocks issued by 3600 different companies
52
Account executive
A licensed individual who works for a brokerage firm and buys or sells securities for clients, also called a stockbroker
53
Churning
Excessive buying and selling of securities to generate commissions
54
Market Order
A request to buy or sell a stock at the current market place
55
Limit order
Request to buy or sell a stock at a specified price
56
Stop loss order
An order to sell a particular stock at the next available opportunity after its market price reaches a specified amount
57
Dollar cost averaging
A long term technique used by my investors who purchase an equal dollar amount of the same stock at equal intervals
58
Direct investment plan
Plan that allows stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm
59
Dividend reinvestment plan
A plan that allows current stockholders the option to reinvest or use their cash dividends to purchase stock of the corporation
60
Margin
Speculative technique whereby an investor borrows part of the money needed to buy a particular stock
61
Selling short
Selling stock that had been borrowed from a brokerage firm and must be replaced at a later date
62
Option
The right to buy or sell a stock at a predetermined price during a specified period of time
63
Mutual fund
Pools the money of many investors to invest in a variety of securities
64
Closed end fund
Fund whose shares are issued by an investment company only when the fund is organized
65
Exchange traded fund
A fund that invests in the stocks or other securities contained in a specified stock or securities index, and whose shares are trade on a securities exchange or over the counter
66
Open end fund
A mutual fund whose shares are issued and redeemed by the investment company at the request of investors
67
Net asset value
X=(Value of funds portfolio-liabilities)/number of shares outstanding
68
Load fund
A mutual fund in which investors pay a commission every time they purchase shares
69
Load charge equation
X=dollar amount of investment X load stated as percentage
70
No load fund
A mutual fund in which the individual investors pays no sales charge
71
Contingent deferred sales load
A 1-5 percentage charge that share holders pay when they sell shares in a mutual fund
72
12b-1 fee
A fee that an investment company levies to defray the costs of advertising and marketing a mutual fund
73
Expense ratio
Amount that investors pay for all of a mutual funds management fees and operating costs
74
Family of funds
A group of mutual funds managed by one investment company
75
Income dividends
The earnings a fund pays to shareholders from its dividends and interest income
76
Capital gain distributions
The payments made to a funds shareholders that result from the sale of securities in the funds portfolio
77
Turnover ratio
A ratio that measures the percentage of a funds holdings that have changed or "been replaced" during a 12 month period of time
78
Reinvestment plan
A service provided by an investment company in which shareholder income dividends and capital gain distributions are automatically reinvested to purchase additional shares of the fund

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