POBF Objective 4.03 Vocabulary
Adjustable-rate mortgage – aka ARM; interest rate increase or decrease during the life of the mortgage
depending on economic conditions
Agricultural commodities – corn, soybeans, wheat, chocolate, coffee; farmers selling crops in advance
of a harvest at what they believe is a good price
American Stock Exchange – another well-known stock exchange
Annual percentage yield – aka APY; the percentage rate equal to the total amount of interest that a
$100 deposit would earn based on a 365-day period
Appraiser – licensed, trained professional who estimates the value of property and gives an official
report on the value to the lending financial institution
Appreciation – a general increase in the value of property that occurs over time
Assessed value – the amount the local government determines your property to be worth for tax
purposes
Bear market – prices of securities are falling for a long period of time
Benefits of home ownership – tax deduction for interest expense and property taxes paid, increased
equity or value, pride of ownership
Bond – a certificate representing a promise to pay a definite amount of money at a stated interest rate
on a specified due date.
Bond components – Face value; interest rate; maturity date
Bond investment – lending money for use by businesses and governments; bonds represent debt
Bull market – prices of securities are rising for a long period of time
Capital gain – if a stock increases in value and is then sold for more than its original cost
Capital loss – if a stock decreases in value and is then sold for less than its original cost
Certificates of Deposit – aka CD; a savings plan that requires funds to be left on deposit for a specific
period of time; higher interest rate than savings account; penalties for early withdrawal
Closing – time when the title to property is transferred from seller to buyer; must have an attorney
Collectibles – ancient coins, works of art, other rare items, autographs, stamps, sports cards, toys
Commission – fee charged by a stockbroker for services rendered
Commodities – grain, livestock, precious metals, currency and financial instruments; purchase in
anticipation of higher market prices in the near future; very risky
Commodity exchanges – Chicago Board of Trade (CBOT); buyers and sellers of commodities are
represented by a trader on the exchange to exchange commodities for money or vice versa
Common stock – general ownership in a corporation and a right to share in its profits; no stated
dividend rate; one vote per share owned; able to attend annual meeting
Compound interest – interest computed on the amount saved plus the interest previously earned
Compound interest formula – A = P(1+r/n)nt; Amount, Principal amount (initial amount you borrowed or
deposited), Annual rate of interest (as a decimal), Number of times interest is compounded, Time (in
years)
Condominium – individually owned housing unit in an apartment-like complex; service fee paid by
condo owners to cover maintenance and yard work
Consumer spending – buying habits
Corporate bonds – private corporations borrow money from investors
Creditor – someone who lends money to an organization by buying a bond
Currency and financial instrument exchange– buying and selling US dollar or Japanese yen or European
Euro or financial instruments
Current income – income used for current living expenses
Current yield of a bond – Dollar amount of Annual interest income/Current market value
Discount broker – just places orders and offers limited research; lower fees than full service broker
Discounting – Series EE bought at half its face value; pays face value at end of term
Dividend yield – dividend per share/market price per share
Dividends – profits paid to stockholders as a return on their investment; taxable
Dow Jones Industrial Average – aka DJIA; a stock index; include 30 of the largest U.S. companies\
Employment – as people obtain or lose jobs, the amount of money they have for spending will affect
company profits
Equity – the difference between the price that you may sell your house and the amount owed on the
mortgage
ETF – exchange traded funds; a portfolio of stocks, bonds or other investments that trade on a stock
exchange like regular stocks
Face value – aka maturity value; the amount being borrowed by the corporation issuing the bond
Fixed rate mortgage – interest rate is set for the term of the loan
Full-service broker – works at a brokerage house providing securities information; research; planning
Futures contract – an agreement to buy or sell an amount of a commodity at a specified price in the
future
Inflation – time value of money; a general increase of prices
Interest – money you receive for letting others use your money
Interest rates – the cost of money
Investing – using your savings to earn more money
Liquidity – the ease with which an investment can be changed into cash without losing its value
Location, location, location – top three factors in determining real estate value
Long-term growth – investment goal for financial security in the future
Market value – aka current value; the price at which a share of stock can be bought and sold in the
stock market
Maturity date – due date for a bond
Money Market Account – a savings plan that pays a variable interest rate based on various government
and corporate securities; do not require long-term deposits; may have a large minimum balance; slightly
higher interest than savings accounts but slightly less than long-term certificates of deposit
Mortgage – a legal document giving the lender a claim against the property if the principal, interest or
both are not paid as agreed; usually for 15, 20 or 30 years that require monthly payments
Municipal Bonds – aka munis; bonds issued by local and state government; highways, bridges, schools;
usually exempt from federal and most state income taxes; safer than corporate bonds
Mutual funds – money from many investors is used to invest in a variety of companies; allow investors
to spread out their risk among many investments
National Association of Security Dealers Automated Quotations – NASDAQ; the U.S. OTC market
New York Stock Exchange – aka NYSE; best known stock exchange
Other investment options – examples: real estate, commodities and collectibles
Over-the-counter market – aka OTC; a network where securities transactions occur using telephones
and computers rather than on an exchange; ex. NASDAQ
Precious metals – gold, silver, copper, platinum; quoted as spot prices per one troy ounce
Preferred stock – has priority over common stock in the payment of dividends; dividends are usually a
set rate; generally less risky than common stock however usually no voting rights
Price earnings ratio – aka P/E ratio; stock price/earnings per share
Property insurance – provides protection from fire, theft, accident or other losses of your home or
property
Real estate – land and anything attached to it; housing, farmland, apartment buildings, shopping malls;
real property investment
Real estate agent – licensed professional that helps people buy and sell real estate
REALTOR – a real estate agent who pays a fee to be a member of the real estate trade organization; not
all real estate agents are REALTORS (yes it is typed in all caps)
Return – aka yield; the percentage of money earned on a savings or investment over a year; higher
return = higher risk
Safety – assurance that the money you have invested will be returned to you
Saving – the storage of money for future use
Savings account – a savings plan with a low or zero minimum balance; usually may deposit and
withdraw money as needed
Securities – stocks, bonds and mutual funds; sold by corporations and governments to raise money.
Share – a unit of ownership
Simple interest – interest computed only on the amount invested
Simple interest rate formula – I = P*R*T; Interest, Principal, Rate, Time
Speculative investment – usually a high risk investment; commodity investing
Standard and Poor’s (S & P) 500 – a stock index based on stock values of 500 major companies
Stock certificate – printed form showing ownership in a corporation
Stock exchange – a business organization that accommodates the buying and selling of securities
Stock index – a measurement of investment values
Stock investment – giving money for use by a business which results in ownership in the business
because of purchasing of a share of stock
Stockbroker – a licensed specialist in the buying and selling of stocks and bonds; paid by commission
Stockholder – person who buys shares in a corporation
Tax-exempt earnings – income taxes are not collected on these investments
Transaction – a buy or sell of a stock or bond
Treasury bills – aka T-bills; short-term borrowing by US government 91 days – 1 year.
Treasury bonds – aka T-bonds; long-term borrowing 10 – 30 years
Treasury notes – aka T-notes; maturities from 1 to 10 years
Truth in Savings – aka TIS; requires financial institutions give consumers information to compare savings
accounts
Upkeep – the cost of maintaining property in good condition
US Savings Bond – Series EE range from $50 - $10,000; pay interest through discounting; Series HH
bonds pay interest twice a year; Series I bonds pay a variable interest rate.
Yield – aka return; the percentage of money earned on a savings or investment over a year; higher yield
= higher risk