Personal Finance Test 4

Front 1

Should you wait to invest in a 401k? Why or why not?

Back 1

You shouldn't wait because your employer might offer a match to your 401k. Which means free money for you.

Front 2

Define: Mortgage Bond

Back 2

A bond that is guaranteed and secured by assets of the issuing firm

Front 3

What is the most stable form of investment?

Back 3

Bonds

Front 4

Risk assumption of an investment...

Back 4

is directly related to the amount of return. The higher the risk, the higher the return.

Front 5

Name the 3 treasury (government) securities

Back 5

Bills: Short term, less than 1 year due

Notes: Medium term, 1-5 years due

Bonds: Long term, up to 30 years due

Front 6

General Obligation Bond

Back 6

A bond that is voted upon by taxpayers

Front 7

Revenue Bond

Back 7

Paid by use of proceeds from the project it financed

Front 8

Serial Bond

Back 8

Bonds of a single issue that mature on different dates

Front 9

Which investment has the least liquidity?

Back 9

Real Estate

Front 10

Junk Bond(Speculative Grade)

Back 10

A high-yield, high-risk security, bond. Issued by a company seeking to raise capital quickly

Front 11

What is a discount?

Back 11

When a bond sells for less than its face value

Front 12

What is a premium?

Back 12

When a bond sells for more than its face value

Front 13

What is the face value of a bond?

Back 13

$1,000

Front 14

Bond Indenture

Back 14

All the details of the bond on one paper. It says the interest rate, due date, bond type etc.

Front 15

Debenture

Back 15

A bond backed by a company

Front 16

Call Feature on a bond

Back 16

When the bond issuer recalls the bond in order to change the interest rates

Front 17

Sinking Fund

Back 17

The money a company puts aside each year in order to pay off bonds

Front 18

Government bond

Back 18

The written pledge of a government or a municipality to repay a specified sum of money, along with interest.

Front 19

Registered Bond

Back 19

A bond in specific ownership to you. The company knows your name and address etc. and will only pay to you

Front 20

Bearer Bond

Back 20

A bond that is owned by the person who holds it.

Front 21

Term Life Insurance

Back 21

Increases in premiums when the term is renewed, if it is not renewed, you lose your insurance.

Front 22

Whole Life Insurance

Back 22

Insures a person for their whole life, has a cash value. Premium insurance decreases with age

Front 23

Universal Life Insurance

Back 23

Has a term, and also has cash value.

Front 24

Ways to make money on a bond

Back 24

Getting paid interest, selling the bond, owning the bond

Front 25

Double indemnity is also known as?

Back 25

Accidental Death

Front 26

Adjustable Life insurance

Back 26

Is designed to let you pay premiums at any time with any amount of money.

Front 27

Variable Life Insurance

Back 27

Cash value of life insurance policy is variable because it is invested in the stock market

Front 28

Annuity

Back 28

A specific amount of money paid over a specific amount of time

Front 29

What is a rider?

Back 29

The change to insurance policy that doesn't change the entire policy

Front 30

Non-Forfeiture Clause

Back 30

Provision that prevents the life insurance company from taking your cash value

Front 31

Participating Policy

Back 31

Pays you extra if the people you have insured have not died or been injured in the past year

Front 32

Proxy

Back 32

You give up your rights to vote to someone else, who will then vote for you

Front 33

Are dividend payments on a common stock guaranteed?

Back 33

No. Common stock is not paid in dividends

Front 34

Preferred Stock Dividends

Back 34

Are accumulative. They get paid before common stock does

Front 35

Stock split

Back 35

When the amount of stocks you have are divided up, so they are worth less, but you have more of them

Front 36

Bull Market

Back 36

A market In which share prices are rising, encouraging buying

Front 37

Bear Market

Back 37

A market in which prices are falling, encouraging selling

Front 38

Selling Short

Back 38

Borrowing money for the stock, selling it, then paying back the money at a later date.

Front 39

Date of Record

Back 39

The day that dividends are available to those that are owed them

Front 40

Which investment has the greatest growth potential?

Back 40

Common Stock

Front 41

What is a foreign corporation?

Back 41

A business that operates in a state that its charter is not held in

Front 42

What is a limit order?

Back 42

When a person requests their stock to be bought or sold at a specific price

Front 43

What is a market order?

Back 43

When a person requests their stock to be bought or sold at that exact moment, regardless of price.

Front 44

What is a stock option?

Back 44

A benefit in the form of an option given by a company to an employee to buy stock in the company at a discount or at a stated fixed price.

Front 45

What is churning?

Back 45

Excessive trading by a broker in a client's account largely to generate commissions. Churning is an illegal.

Front 46

Buying on margin

Back 46

You borrow money to buy the stock

Front 47

IPO stands for?

Back 47

Initial Public Offering

Front 48

Dollar cost averaging

Back 48

When someone buys stock regularly. When one stock is doing bad, they buy more of another stock to even out their losses. Its a psychological thing.

Front 49

NASDAQ

Back 49

National Association of Security Dealers Automated Quotations

Front 50

Common Stock

Back 50

Gets a share in the company's profits, has voting rights, is more risky, has a higher payout, no dividends, can be diluted

Front 51

Preferred Stock

Back 51

Doesn't benefit from profit of company, has no voting rights, is less risky, has a lower payout than common stock, cannot be diluted, has dividends

Front 52

What are the 5 stock sizes?

Back 52

Large cap, Mid cap, Small cap, Micro Cap, Penny cap(under $1)

Front 53

What is yield, and how do you calculate yield?

Back 53

The rate of return earned by an investor who holds a bond for a stated period of time.

Take the amount of dividends for the year and divide them by the price per share of the stock.

Front 54

Beta Score/Index

Back 54

Relative risk of a particular stock in relation to all other stocks in the market. Smaller than one = less risky/volatile. Higher than one = more risky.

Front 55

Non-participating Insurance Policy

Back 55

Life insurance that does not provide policy dividends. Also called non par policy.

Front 56

Blue Chip Stock

Back 56

A safe investment that generally attracts conservative investors.

Front 57

What is a beneficiary?

Back 57

A person designated to receive something, such as life insurance proceeds from the insured.

Front 58

What is a interest adjusted index?

Back 58

A method of evaluating the cost of life insurance by taking into account the time value of money. Used in comparing policy costs

Front 59

What is asset allocation?

Back 59

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

Front 60

Municipal Bond

Back 60

A debt security issued by a state or local government.

Front 61

Corporate Bond

Back 61

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

Front 62

What is a convertible bond?

Back 62

A bond that can be exchanged, at the owners option, for a specified number of shares of the corporation's common stock.

Front 63

What is equity financing?

Back 63

Money received from the owners or from the sale of shares of ownership in a business

Front 64

What is earnings per share and how do you calculate it?

Back 64

A corporations earnings divided by the number of outstanding shares of a firm's common stock.

Front 65

Price Earnings Ratio

Back 65

The price of a share of stocks divided by the corporations earning per share of the stock.

Front 66

Secondary Market

Back 66

A market for existing financial securities that are currently traded among investors.