The first public offering of a corporation's stock
Specialists who assist in the issue and sale of new securities
Large organizations- such as pension funds, mutual funds, and insurance companies- that invest their own funds or the funds of others
An organization whose members can buy and sell (exchange) securities for companies and individual investors
Over the counter market
Exchange that provides a means to trade stocks not listed on the national exchanges
A nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically
Securities and Exchange Commission (SEC)
Federal agency that has responsibility for regulating the various stock exchanges
A condensed version of economic and financial information that a company must file with the SEC before issuing stock; the prospectus must be sent to prospective investors
Shares of ownership in a company
Evidence of stock ownership that specifies the name of the company, the number of shares it represents, and the type of stock being issued
Part of a firm's profits that the firm may distribute to stockholders as either cash payments or additional shares of stock
The most basic form of ownership in a firm; it congers voting rights and the right to share in the firm's profits through dividends, if approved by the firm's board of directors
Stock that gives its owners preference in the payment of dividends and an earlier claim on assets than common stockholders if the company is forced out of business and its assets sold
A corporate certificate indicating that a person has lent money to a firm (or a government).
The exact date the issuer of a bond must pay the principal to the bondholder
The payment the issuer of the bond makes to the bondholders for the use of the borrowed money
Bonds that are unsecured (i.e., not backed by any collateral such as equipment).
A reserve account in which the issuer of a bond periodically retires some part of the bond pricipal prior to maturity so that enough capital will be accumulated by the maturity date to pay off the bond
A registered representative who works as a market intermediary to buy and sell securities for clients
Buying several different inverstment alternatives to spread the risk of investing
The positive difference between the purchase price of stock and its sale price
An action by a company that gives stockholders two or more shares of stock for each one they own
Buying stock on margin
Purchasing stock by borrowing some of the purchase cost from the brokerage firm
High-risk, high-interest bonds
An organization that buys stocks and bonds ans then sells share in those securities to the public
Exchange traded funds(EFTs)
Collections of stock and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds
Dow Jones Industrial Average (the Dow)
The average cost of 30 selected industrial stocks, used to give an indication of the direction (up or down) of the stock market over time
Giving instructions to computers to automatically sell if the price of a stock dips to a certain point to avoid potential losses
Anything that people generally accept as payment for goods and services
The direct trading of goods and services for other goods and services
The amount of money the Federal Reserve Bank makes available for people to buy goods and services
Money that can be accessed quickly and easily (coins and paper money, checks, travelers checks, etc.).
Money included in M-1 plus money that may take a little more time to obtain (savings accounts, money market accounts, mutual funds, certificates of deposit, etc.).
M-2 plus big deposits like institutional money market funds
A percentage of commercial bank's checking and savings accounts that must be physically kept in the bank
The buying and selling of U.S. government bonds by the Fed with the goal of regulating the money supply
The interest rate that the Fed charges for loans to member banks
A profit-seeking organization that receives deposits from individuals and corporations in the form of checking and savings accounts and then uses some of these funds to make loans
The technical name for a checking account; the money in a demand deposit can be withdrawn anytime on demand from the depositor
The technical name for savings account; the bank can require prior notice before the owner withdraws money from a time deposit
Certificate of deposit (CD)
A time-deposit (savings) account that earns interest to be delivered at the end of the certificate's maturity date
Savings and loan association (S&L)
A financial institution that accepts both savings and checking deposits and provides home mortgage loans.
Nonprofit, member-owned financial cooperatives that offer the full variety of banking services to their members
Financial organizations that accept no deposits but offer many of the services provided by regular banks (pension funds, insurance companies, commercial finance companies, consumer finance companies, and brokerage houses).
Amounts of money put aside by corporations, nonprofit organizations, or unions to cover part of the financial needs of members when they retire
Federal Deposit Insurance Corporation (FDIC)
An independent agency of the U.S. government that insures bank deposits
Savings Association Insurance Fund (SAIF)
The part of the FDIC that insures holders of accounts in savings and loan associations.
Electronic Funds Transfer (EFT) system
A computerized system that electronically performs financial transactions such as making purchases, paying bills, and receiving paychecks.
An electronic funds transfer tool that serves the same function as checks: it withdraws funds from a checking account.
An electronic funds transfer tool that is a combination credit card, debit card, phone card, and driver's license card, and more.
Letter of Credit
A promise by the bank to pay the seller a given amount if certain conditions are met.
A promise that the bank will pay some specified amount at a particular time.
The bank primarily responsible for financing economic development; also known as the International Bank for Reconstruction and Development.
International Monetary Fund (IMF)
Organization that assists the smooth flow of money among nations.
The chance of loss, the degree of probability of loss, and the amount of possible loss.
A chance of either profit or loss.
The threat of loss with no chance of profit.
The practice of setting aside money to cover routine claims and buyings only "catastrophe" policies to cover big losses.
A risk that no insurance company will cover.
A risk that the typical insurance company will cover.
The possibility of the policyholder to suffer a loss.
A written contract between the insured and an insurance company that promises to pay for all or part of a loss.
The fee charged by an insurance company for an insurance policy.
A statement of loss that the insured sends to the insurance company to request payment.
Law of large numbers
Principal that if a large number of people are exposed to the same risk, a predictable number of losses will occur during a given period of time.
Rule of indemnity
Rule saying that an insured person or organization cannot collect more that the actual loss from an insurable risk.
Stock insurance company
a type of insurance company owned by stockholders.
Mutual insurance company
A type of insurance company owned by its policyholders.
Health Maintenance organization
Health care organizations that require members to choose from a restricted list of doctors.
Preferred Provider organizations (PPos)
Health care organizations similar to HMOs except that they allow members to choose their own physicians (for a fee).
Health Savings Accounts ( HSAs)
Tax-deferred savings accounts linked to low-cost, high-deductible health insurance policies.
Buying stock when everyone else is selling or vice versa.
Pure insurance protection for a given number of years.
Whole life insurance
Life insurance that combines pure insurance and savings.
Variable life insurance
Whole life insurance that invests the cash value of the policy in stocks or other high-yielding securities.
a contract to make regular payments to a person for life or for a fixed period.
Insurance that pays part of the cost of a long-term sickness or an accident.
A broadly based insurance policy that saves you money because you buy all your insurance from one company.
The term used to describe the Old-Age, Survivors, and Disability Insurance Program established by the Social Security Act of 1935.
Individual retirement account
A tax deferred investment plan that enables you (and your spouse, if you are married) to save part of your income for retirement; a traditional IRA allows people who qualify to deduct from their reported income the money they put into an account
Tax deferred contributions
Retirement account deposits for which you pay no current taxes, but the earnings gained are taxed as regular income when they are withdrawn at retirement
An IRA where you dont get upfront deductions on your taxes as you would with a traditional IRA, but the earnings grow tax-free and are also tax-free when they are withdrawn
A savings plan that allows you to deposit pretax dollars and whose earnings compund tax free until withdrawl, when the money is taxed at ordinary income tax rates
A document that names the guardian for your children, states how you want your assets distributed, and names the executor for your estate
A person who assembles and values your estate, files income and other taxes, and distributes assets.