exam 3 | AAEC 2104 - Personal Financial Planning, Quizzes of Business Finance

Download exam 3 | AAEC 2104 - Personal Financial Planning and more Quizzes Business Finance in PDF only on Docsity! TERM 1 Basic health insurance DEFINITION 1 A term used to describe most health insurance, which includes a combination of hospital, surgical, and physician expense insurance. TERM 2 Hospital insurance DEFINITION 2 Insurance that covers the costs associated with a hospital stay, including room charges, nursing costs, operating room fees, and drugs supplied by the hospital. TERM 3 Surgical insurance DEFINITION 3 Insurance that covers the cost of surgery. TERM 4 Physician expense insurance DEFINITION 4 Insurance that covers physician fees outside of surgery TERM 5 Stop-loss provision DEFINITION 5 A medical insurance feature that limits the total dollar amount that the policy holder is responsible for paying TERM 6 Fee-for-service or Traditional Indemnity Plan DEFINITION 6 An insurance plan that provides reimbursement for all or part of your medical expenditures. It gives you a good deal of freedom to choose your doctor and hospital. TERM 7 Managed Health Care or Prepaid Care Plan DEFINITION 7 An insurance plan that entitles you to the health care provided by a specified group of participating doctors, hospitals, and clinics. These plans are generally offered by health maintenance organizations or variations of them. TERM 8 Coinsurance or Percentage Participation Provision DEFINITION 8 An insurance provision that defines the percentage of each claim that the insurance company will pay TERM 9 Co-Payment or Deductible DEFINITION 9 The amount of expenses that the insured must pay before the insurance company will pay any insurance benefits TERM 10 Health Maintenance Organization (HMO) DEFINITION 10 A prepaid insurance plan that entitles members to the services of participating doctors, hospitals and clinics. TERM 21 Flexible spending Account (FSA) DEFINITION 21 An employer sponsered medical plan that allows each employee to have pre-tax earnings deposited into a specially designated account for the purposes of paying health care bills. The employee can withdraw funds from this account to offset unreimbursed medical or dental expenses or qualified child care expenses. TERM 22 Guaranteed renewability DEFINITION 22 A health insurance provision that allows you to renwe your policy regardless of your health until you reach some preset age, generally 65. TERM 23 Disability insurance DEFINITION 23 Health insurance that provides payments to the insured in the event that income is interrupted by illness, sickness, or accident. TERM 24 Short term disability (STD) DEFINITION 24 A disability policy that provides benefits over a given period, generally from 6 months to 2 years. TERM 25 Long term disability (LTD) DEFINITION 25 A disability policy that provieds benefits until the individual reaches an age specified in the contract, generally 65 or 70, or for the insured's lifetime. TERM 26 Waiting or elimination period DEFINITION 26 The period after the disability during which no benefits occur. TERM 27 Waiver of premium provision DEFINITION 27 A disability provision that allows your insurance to stay in force should you become unable to work because of disability or illness. TERM 28 Rehabilitation coverage DEFINITION 28 A disability insurance provision that allows payments for vocational rehab, allowing the policyholder to be retrained for employment. TERM 29 Long term care insurance DEFINITION 29 Insurance thats aimed at covering the costs associated with long term nursing home care, commonly associated with victims of stroke, chronic illness, or alzheimers, or those who can simply no longer manage to live on their own. TERM 30 HO's DEFINITION 30 The six standardized "Homeowners" insurance policies available to homeowners and renters TERM 31 Named perils DEFINITION 31 A type of insurance that covers a specific set of named perils. If a peril isnt specifically named, it isnt covered. TERM 32 Open Perils DEFINITION 32 A type of insurance that covers all perils except those specifically noted as excluded. TERM 33 Property insurance DEFINITION 33 Insurance that protects you against the loss of your property or posessions. TERM 34 Personal liability insurance DEFINITION 34 Insurance covering all liabilities other than those resulting from the negligent operation of an automobile or those associated with buisness or professional causes. TERM 35 Endorsement DEFINITION 35 A written attachment to an insurance policy to add or subtract coverage. TERM 46 Personal automobile policy(PAP) DEFINITION 46 A standardized insurance policy for an individual or family. TERM 47 Combined single limit DEFINITION 47 Auto insurance liability coverage that combines both bodily injury and property damage liability. TERM 48 Split limit coverage DEFINITION 48 Auto insurance liability coverage that allows for either seperate coverage limits for bodily injury and property damage, split coverage limits per person, or both. TERM 49 Uninsured Motorists protection coverage DEFINITION 49 Coverage against injuries caused by a hit and run driver or by an uninsured motorist or a negligent driver whose insurance company is insolvent. TERM 50 Collision loss DEFINITION 50 The portion of auto insurance coverage that provides benefits to cover damages resulting from an accident with another vehicle or object. TERM 51 Other than collision loss or comprehensive physical damage coverage DEFINITION 51 Auto insurance coverage for noncollision losses. For example, it would cover damage if the car were hit in a parking lot or if the door were damaged as a result of banging it into a parked car next to it. TERM 52 No-fault insurance DEFINITION 52 A type of auto insurance in which your insurance company protects you in case of an accident regardless of who is at fault. TERM 53 Umbrella liability insurance, or, umbrella policy DEFINITION 53 An insurance policy that supplements liability coverage on a homeowners and/or automobile insurance policy. This insurance kicks in after the homeowners and/or automobile policy coverage runs out and provides coverage for claims not covered under homeowners insurance such as libel, slander, and invasion of privacy. TERM 54 Investment DEFINITION 54 An asset that generates value or a return. For example, stocks pay dividends and bonds pay interest, so these are investments. TERM 55 Income return DEFINITION 55 Investment return received directly from the company or organization in which youve invested, usually in the form of dividends or interest payments. TERM 56 Speculation DEFINITION 56 An asset whose value depends solely on supple and demand, as opposed to being based on return that is generates. For example, gold coins and baseball cards are worth more in the future only if someone is willing to pay more for them. TERM 57 Derivative securities DEFINITION 57 Securities whose value is derived from the value of other assets TERM 58 Option DEFINITION 58 A security that gives its owner the right to buy or sell an asset - generally common stock. - at a specified price over a specified period. TERM 59 Maturity date DEFINITION 59 The date at which the borrower must repay the loan or borrowed funds. TERM 60 Par Value or Principal DEFINITION 60 The stated amount on the face of a bond, which the firm is to repay on the maturity date. TERM 71 Financial risk DEFINITION 71 The risk associated with a company's use of debt. If a company takes on too much debt and cant meet its obligations, investors risk the company defaulting or dropping in stock value. TERM 72 Liquidity risk DEFINITION 72 Risk associated with the inability to liquidate a security quickly and at a fair market price. TERM 73 Market risk DEFINITION 73 Risk associate with overall market movements. TERM 74 Political and regulatory risk DEFINITION 74 Risk resulting from unanticipated changes in the tax or legal enviornment. TERM 75 Exchange Rate risk DEFINITION 75 The risk of fluctuations in security prices from the variability in earnings resulting from changes in exchange rates. TERM 76 Call risk DEFINITION 76 The risk to bondholders that a bond may be called away from them before maturity. TERM 77 Calling a bond DEFINITION 77 The redeeming of a bond before its maturity date. Many bonds are callable. TERM 78 Portfolio DEFINITION 78 A group of investments held by an individual. TERM 79 Systematic or market-related or nondiversifiable risk DEFINITION 79 That portion of a securitys risk or variability that cant be eliminated through investor diversification. This type of variability or risk results from factors that affect all securities. TERM 80 Unsystematic or Firm-specific or Company- Unique risk of diversifiable risk DEFINITION 80 Risk or variability that can be eliminated through investor diversification. Unsystematic risk results from factors that are unique to a particular firm. TERM 81 Asset Allocation DEFINITION 81 An attempt to ensure that the investors strategy reflects his or her investment time horizon and is well diversified, generally classes of investments, such as domestic common stocks, international common stocks, and bonds. TERM 82 Efficient Market DEFINITION 82 A market in which all relevant information about the stock is reflected in the stock price. TERM 83 Securities Markets DEFINITION 83 A term used to describe where financial securities or instruments are traded. (Common stock and bonds) TERM 84 Primary Market DEFINITION 84 A market in which NEWLY ISSUED, as opposed to previously issued, securities are traded. TERM 85 Initial Public Offering (IPO) DEFINITION 85 The first time a company's stock is traded publicly TERM 96 Churning DEFINITION 96 Excessive trading in a security account that is inappropriate for the customer and serves only to generate commissions. TERM 97 Continuous Markets DEFINITION 97 Markets in which trading can occur at anytime, with prices free to fluctuate as trading occurs. TERM 98 Specialist DEFINITION 98 An exchange member who oversees the trading in one or more stocks and is responsible for maintaining a "fair and orderly" market in those stocks by buying or selling for his or her account. TERM 99 Round lot DEFINITION 99 A group or lot of 100 shares of common stock. Stocks are traded in round lots on the New York Stock Exchange. TERM 100 Odd Lot DEFINITION 100 An order involving between 1 and 99 shares of stock. TERM 101 Open or Good-Till-Canceled (GTC) order DEFINITION 101 A trading order that remains effective until filled or cancelled. TERM 102 Discretionary Account DEFINITION 102 An account that gives your broker the power to make trades for you. TERM 103 Market order DEFINITION 103 An order to buy or sell a set number of securities immediately at the best price available. TERM 104 Limit Order DEFINITION 104 An order that specifies a securities trade is to be made only at a certain price or better. TERM 105 Stop or Stop-Loss Order DEFINITION 105 An order to sell a security if the price drops below a specified level or to buy if the price climbs above a specified level. TERM 106 Short Selling DEFINITION 106 Borrowing stock from your broker and selling it with an obligation to replace the stock later. TERM 107 Margin Requirement DEFINITION 107 The percentage that an investor must have on deposit with a broker when selling short. TERM 108 Asset Management Account DEFINITION 108 Comprehensive financial services packages offered by a brokerage firm that can include a checking account; credit and debit cards: a money market mutual fund; loans; automatic payment of fixed payments. such as mortgages or other debt; brokerage services (buying and selling stocks or bonds); and a system for the direct payment of interest, dividends, and proceeds from security sales into the money market mutual fund. TERM 109 Full service broker or account executive DEFINITION 109 A broker who gives advice and is paid on commission, where that commission is based on the sales volume generated. TERM 110 Cash Accounts DEFINITION 110 Securities trading accounts in which the investors pay in full for their security purchases, with the payment due within 3 business days of the transaction. TERM 121 Proxy DEFINITION 121 A legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting. TERM 122 Stock Split DEFINITION 122 Increasing the number of stock shares outstanding by replacing the existing shares of stock with a given number of shares. For example, in a two-for-one split, for every share of existing stock you hold, you would receive two share of new stock. TERM 123 Stock repurchase DEFINITION 123 A company's repurchasing, or buying back, of it's own common stock. TERM 124 Dividend Yeild DEFINITION 124 The ratio of the annual dividends to the market price of stock. TERM 125 Earnings per share ratio DEFINITION 125 Earnings per share = Net income - preffered stock dividends / number of shares of common stock outstanding TERM 126 Market to book or price to book ratio DEFINITION 126 Market to book ratio = stock price / book value per share TERM 127 Stock market index DEFINITION 127 A measure of the performance of a group of stocks that represent the market or a sector of the market. TERM 128 Dow Jones Industrial Average (DJIA) or Dow DEFINITION 128 A commonly used stock index or indicator of how well stocks have done. This index is compromised of the stock prices or 30 large industrial firms. TERM 129 Standard and poor's 500 stock Index or S&P 500 DEFINITION 129 Another commonly used stock index or indicator of how well stocks have done based on the movements of 500 stocks, primarily from the NYSE. TERM 130 Bear Market DEFINITION 130 A stock market characterized by falling prices. TERM 131 Bull Market DEFINITION 131 A stock market characterized by rising prices TERM 132 Blue chip stocks DEFINITION 132 Common stocks issued by large nationally known companies with sound financial histories of solid dividend and growth records. TERM 133 Growth Stocks DEFINITION 133 Common stocks issued by companies that have exhibited sales and earnings growth well above their industry average. Generally, these are smaller stocks, and many times they are newly formed. TERM 134 Income Stocks DEFINITION 134 Common stocks issued by mature firms that pay relatively high dividends, with little increase in earnings. TERM 135 Speculative Stocks DEFINITION 135 Common stocks that carry considerably more risk and variability than a typical stock. TERM 146 Beta DEFINITION 146 The measure of how responsive a stock or portfolio is to changes in the market portfolio, Such as the S&P 500 index. TERM 147 Par Value DEFINITION 147 The face value of a bond, or the amount that's returned to the bond holder at maturity. It's also reffered to as the bond's denomination TERM 148 Maturity DEFINITION 148 The length of time until the bond issuer returns the par value to the bondholder and terminates the bond. TERM 149 Coupon interest rate DEFINITION 149 The annual rate of interest to be paid out on a bond, calculated as a percentage of the par value. TERM 150 Indenture DEFINITION 150 A legal agreement between the firm issuing a bond and the bond trustee who represents the bondholders.reflects debt or purchase obligation. TERM 151 Call provision DEFINITION 151 A bond provision that gives the issuer the right to repurchase, or "call" the bonds from their holders at stated prices over specified periods. TERM 152 Deferred Call DEFINITION 152 A bond provision stating that the bond can't be called until a set number of years has passed since it was issued. TERM 153 Sinking Fund DEFINITION 153 A fund to which the bond issuer deposits money to pay off a bond issue. TERM 154 Corporate Bonds DEFINITION 154 Bonds issued by corporations TERM 155 Secured Bond DEFINITION 155 A bond that is backed by the pledge of collateral. TERM 156 Mortgage Bond DEFINITION 156 A bond secured by a lien or real property TERM 157 Debenture DEFINITION 157 Any unsecured long term bond. TERM 158 Agency Bonds DEFINITION 158 Bonds issued by government agencies other than the Treasury. TERM 159 Pass through Certificate DEFINITION 159 A certificate that represents a portion of ownership in a pool of federally insured mortgages TERM 160 (Treasury) Inflation Protected Indexed Securities (TIPS) DEFINITION 160 U.S. Treasury Bonds for which the par value changes with the consumer price index to guarantee the investor a real return. These bonds have a maturity of 5, 10, or 20 years and have a minimum par value of $1000.