Exam 4 | AAEC 2104 - Personal Financial Planning, Quizzes of Business Finance

Download Exam 4 | AAEC 2104 - Personal Financial Planning and more Quizzes Business Finance in PDF only on Docsity! TERM 1 Investment Company DEFINITION 1 A firm that invests the pooled money of a number of investors in return for a fee. TERM 2 Open-End Investment Company or Mutual Fund DEFINITION 2 A mutual fund that has the ability to issue as many shares as investors want. The value of all the investments that the fund holds determines how much each share in the mutual fund is worth. TERM 3 Net Asset Value (NAV) DEFINITION 3 The dollar value of a share in a mutual fund. It's the value of the fund's holdings (minus any debt) divided by the number of shares outstanding. TERM 4 Closed end investment Company or Mutual fund DEFINITION 4 A mutual fund that can't issue new shares. These funds raise money only once by issuing a fixed number of shares, and thereafter the shares can be traded between investors. The value of the investments the funds hold and investor demand for shares in the fund. TERM 5 Unit Investment Trust DEFINITION 5 A fixed pool of securities, generally municipal bonds, in which each share represents a proportionate ownership interest in that pool. The bonds are purchased and then held until maturity, at which time the trust is dissolved. TERM 6 Real Estate Investment Trust or REIT DEFINITION 6 An investment vehicle similar to a mutual fund that specializes in real estate investments, such as shopping centers or rental property, or that makes real estate loans. TERM 7 Hedge Fund DEFINITION 7 An investment that is private, largely unregulated, and very risky and which charges very high fees and only allows wealthy investors to invest. TERM 8 Load DEFINITION 8 A sales commission charged on a mutual fund TERM 9 Load Fund DEFINITION 9 A mutual fund on which a load or sales commission is charged TERM 10 Back-end loan DEFINITION 10 A commission that's charged only when the investor liquidates his or her holdings. TERM 21 Life Cycle Funds DEFINITION 21 Mutual funds that try to tailor their holdings to the investor's individual characteristics, such as age and risk tolerance. TERM 22 Target Retirement fund DEFINITION 22 A mutual fund professionally managed for an investor's stage of retirement with the investments in the fund automatically growing more conservative as the investor's retirement date nears. TERM 23 Bond Funds DEFINITION 23 Mutual funds that invest primarily in bonds. TERM 24 EFT's of Exchange traded funds DEFINITION 24 A hybrid between a mutual fund and an individually traded stock or bond that trade on an exchange just as individual securities do an can be bought and sold throughout the trading day TERM 25 Mutual fund Prospectus DEFINITION 25 A description of the mutual fund, including the fund's objectives and risks, it's historical performance, its expenses, the manager's history, and other info. TERM 26 Defined benefit plan DEFINITION 26 A traditional pension plan in which you recieve a promised or "defined" pension payout at retirement. The payout is based on a formula that takes into account your age at retirement, salary level, and years of service. TERM 27 Noncontributory Retirement plan DEFINITION 27 A retirement plan in which the employer provides all the funds and the employee need not contribute. TERM 28 Contributory retirement plan DEFINITION 28 A retirement plan in which that employee, possibly with the help of the employer, provides the funds for the plan. TERM 29 Portability DEFINITION 29 A pension fund provision that allows employees to retain and transfer any pension benefits already earned to another pension plan if they leave the company. TERM 30 Vested DEFINITION 30 To gain the right to the retirement contributions made by your employer in your name. In the case of a pension plan, employees become vested when they've worked for a specified period of time and thus, gained the right to pension benefits. TERM 31 Funded Pension Plan DEFINITION 31 A pension plan in which the employer makes pension contributions directly to a trustee who holds and invests the employee's retirement funds. TERM 32 Unfunded pension plan DEFINITION 32 A pension fund in which the benefits are paid out of current earnings on a pay-as-you-go basis. TERM 33 Cash-balance plan DEFINITION 33 A retirement plan in which workers are credited with a percentage of their pay, plus a predetermined rate of interest. TERM 34 Defined contribution plan DEFINITION 34 A pension plan in which you and your employer or your employer alone contributes directly to a retirement account set aside specifically for you. In effect, a defined-contribution plan can be thought of as a savings account for retirement. TERM 35 Profit sharing plan DEFINITION 35 A pension plan in which the company's contributions vary from year to year depending on the firm's performance. The amount of money contributed to each employee depends on the employee's salary level. TERM 46 529 Plans DEFINITION 46 Tax-advantaged savings plans used only for college and graduate school. TERM 47 Single life Annuity DEFINITION 47 An annuity in which you receive at set monthly payment for your entire life. TERM 48 Annuity for life of a "certain period" DEFINITION 48 A single life annuity that allows you to receive your payments for a fixed period of time. Payments will be made to you for the remainder of your life, but if you die before the end of the time period (generally either 10 or 20 years), payments will continue to be made to your beneficiary until the end of the period. TERM 49 Joint and Survivor Annuity DEFINITION 49 An annuity that provides payments over the life of both you and your spouse. TERM 50 Lump-sum option DEFINITION 50 A payout arrangement in which you receive all your benefits in one single payment. TERM 51 Unified Tax Credit DEFINITION 51 An estate and gift tax credit that, in 2012, allows the first $5 million of an estate and lifetime gifts (beyond the annual gift exclusion) to be passed on tax free. TERM 52 Generation Skipping tax DEFINITION 52 A tax on wealth and property transfers to a person two or more generations younger than the donor. TERM 53 Will DEFINITION 53 A legal document that describes how you want your property to be transferred to others after your death. TERM 54 Beneficiary DEFINITION 54 An individual who is willed your property. TERM 55 Executor or personal representitive DEFINITION 55 An individual who is responsible for carrying out the provisions of your will and managing your property until the estate is passed on to your heirs. TERM 56 Guardian DEFINITION 56 An individual who'll care for any children under the age of 18 and manage their property. TERM 57 Probate DEFINITION 57 The legal document procedure that establishes the validity of a will and then distributes the estate's assets. TERM 58 Codicil DEFINITION 58 An attachment to a will that alters or amends a portion of the will. TERM 59 Letter of Last Instructions DEFINITION 59 A letter, generally to your surviving spouse, that provides information and directions with respect to the execution of the will. TERM 60 Durable Power of Attorney DEFINITION 60 A document that provides for someone to act on your behalf in the event that you become mentally incapacitated. TERM 71 Testamentary Trust DEFINITION 71 A trust created by your will, which becomes active after you die. TERM 72 Family Trust DEFINITION 72 A trust established to transfer assets to your children, while allowing the surviving spouse access to funds in the trust if necessary. Upon the death of the surviving spouse, the remaining funds in the trust are distributed to the children tax free. TERM 73 Portable Estate Exemption DEFINITION 73 An exemption that allows a deceased spouse's unused estate tax exclusion to be shifted to the surviving spouse. TERM 74 Qualified Terminable Interest Property Trust (Q-TIP) DEFINITION 74 A trust that gives the individual establishing the trust the ability to direct income from the trust to his or her spouse over the spouse's life, and then at the spouses death, to chose to whom the assets go. TERM 75 Sprinkling Trusts DEFINITION 75 A trust that distributes income according to need rather than to some preset formula. The trustee is given discretion to determine who needs what among the designated beneficiaries and then "sprinkles" the income among them according to need.