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Buis > Personal Finance 4 > Flashcards

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
Q

Registered bond

A

A bond that is registered in the owners name by the issuing company

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26
Q

How to calculate amount of annual interest?

A

X=face value-Interest Rate

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27
Q

Registered coupon bond

A

A bond that is Registered for principal only, not for interest

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28
Q

How to find approximate market value?

A

X=Dollar amount of annual interest/Comparable interest rate

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29
Q

How to find current price if a bond?

A

X=Bond price quotations X face value

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30
Q

What is current yield?

A

X=Annual Interest Amount/Current Price

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31
Q

Common stock

A

Most basic form of corporate ownership

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32
Q

Equity financing

A

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

33
Q

Dividend

A

Distribution of money, stock, or other property that a corporation pays to stockholders

34
Q

Proxy

A

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
Q

Record date

A

The date on which a stockholder must be registered on the corporations books in order to receive a dividend payment

36
Q

Stick split

A

A procedure in which the shares of stock owned by existing stockholders are divided into a larger number of shares

37
Q

Preferred stock

A

Type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends

38
Q

How to calculate earnings per share?

A

X=earnings/number of shares outstanding

39
Q

Price earnings ratio

A

X=price per share/Earnings per share

40
Q

How to calculate dividend yield

A

X=annual dividend amount/current price per share

41
Q

Calculate total return

A

X=Dividends+Capital Gains

42
Q

Calculate Book Value

A

X=(assets-liabilities)/number of shares outstanding

43
Q

Stock market value

A

Situation in which stocks are trading at prices above their actual worth

44
Q

Primary Market

A

A market in which an investor purchase ms financial securities, via an investment bank or other representative, from the issuer of those securities

45
Q

Investment Bank

A

Financial firm that assists corporations in raising funds, usually by helping to sell new security issues

46
Q

Initial Public offering

A

Occurs when a corporation sells stock to the general public for the first time

47
Q

Secondary market

A

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

48
Q

Securities exchange

A

A market place where member brokers who represent investors meet to buy and sell securities

49
Q

Specialists

A

Buys or sells a particular stock in an effort to maintain an orderly market

50
Q

Over the counter market

A

A network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange

51
Q

Nasdaq

A

An electronic marketplace for stocks issued by 3600 different companies

52
Q

Account executive

A

A licensed individual who works for a brokerage firm and buys or sells securities for clients, also called a stockbroker

53
Q

Churning

A

Excessive buying and selling of securities to generate commissions

54
Q

Market Order

A

A request to buy or sell a stock at the current market place

55
Q

Limit order

A

Request to buy or sell a stock at a specified price

56
Q

Stop loss order

A

An order to sell a particular stock at the next available opportunity after its market price reaches a specified amount

57
Q

Dollar cost averaging

A

A long term technique used by my investors who purchase an equal dollar amount of the same stock at equal intervals

58
Q

Direct investment plan

A

Plan that allows stockholders to purchase stock directly from a corporation without having to use an account executive or a brokerage firm

59
Q

Dividend reinvestment plan

A

A plan that allows current stockholders the option to reinvest or use their cash dividends to purchase stock of the corporation

60
Q

Margin

A

Speculative technique whereby an investor borrows part of the money needed to buy a particular stock

61
Q

Selling short

A

Selling stock that had been borrowed from a brokerage firm and must be replaced at a later date

62
Q

Option

A

The right to buy or sell a stock at a predetermined price during a specified period of time

63
Q

Mutual fund

A

Pools the money of many investors to invest in a variety of securities

64
Q

Closed end fund

A

Fund whose shares are issued by an investment company only when the fund is organized

65
Q

Exchange traded fund

A

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
Q

Open end fund

A

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors

67
Q

Net asset value

A

X=(Value of funds portfolio-liabilities)/number of shares outstanding

68
Q

Load fund

A

A mutual fund in which investors pay a commission every time they purchase shares

69
Q

Load charge equation

A

X=dollar amount of investment X load stated as percentage

70
Q

No load fund

A

A mutual fund in which the individual investors pays no sales charge

71
Q

Contingent deferred sales load

A

A 1-5 percentage charge that share holders pay when they sell shares in a mutual fund

72
Q

12b-1 fee

A

A fee that an investment company levies to defray the costs of advertising and marketing a mutual fund

73
Q

Expense ratio

A

Amount that investors pay for all of a mutual funds management fees and operating costs

74
Q

Family of funds

A

A group of mutual funds managed by one investment company

75
Q

Income dividends

A

The earnings a fund pays to shareholders from its dividends and interest income

76
Q

Capital gain distributions

A

The payments made to a funds shareholders that result from the sale of securities in the funds portfolio

77
Q

Turnover ratio

A

A ratio that measures the percentage of a funds holdings that have changed or “been replaced” during a 12 month period of time

78
Q

Reinvestment plan

A

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

Buis (7 decks)

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