Personal Finance-Chapter 11

Emergency Fund

an amt of money you can obtain quickly in case of immediate need

Line of Credit

a short term loan that is approved before the money is actually needed

Seven steps to survive a financial crisis/make sure financial affairs are in order

Establish a larger than usual emergency fund
Know what you owe
Reduce Spending
Pay off credit cards
Apply for a line of credit at your bank, credit union, or financial institution
Notify credit card companies and lenders if you are unable tomake payments

how long can a bankruptcy or going bankrupt remain on your credit report?

Up to ten years

What are the employer sponsored retirement accounts?

401(k) or 403(b)

What does safety in an investment mean?

Minimal risk or loss

Speculative investment

high-risk investment made in the hope of earning a relatively large profit in a short amount of time

how should risk and investment be related?

The potential return on any investment should be directly related to the risk the investor assumes

inflation

rise in the general level of prices

If values of investments decrease

overall interest rates increase pg 258

Interest rate risk is associated with

preferred stocks or government/corporate bonds resulting in changes in the interest rates in the economy

how does the govt reduce interest rate risk

inflation protected bonds

most conservative investments

passbook savings, accounts, certificates of deposit, securities by u.s. govt

Liquidity

ability to buy or sell an investment quickly w/o substantially affecting the investments value

Asset allocation

process of spreading your assets amoung several different types of investments to lessen risk

government bond

written pledge of a government or a municipality to repay a specified sum of money, along with interest

municipal bond

debt security issued by a state or local government

general obligation bond

bond backed by the full faith, credit, and unlimited taxing power of the government that issued it

revenue bond

bond that is repaid from the income generated by the project it is designed to finance

Corporate bond

corporations written pledge to repay a specified amt of money with interest

maturity date

for a corporate bond, the date on which the corporation is to repay the borrowed money

bond indenture

a legal document that details all of the conditions relating to a bond issue

trustee

financially independent firm that acts as the bondholders representative

debenture

bond that is backed only by the reputation of the issuing corporation

mortgage bond

corporate bond secured by various assets of the issuing firm

convertible bond

a bond that can be exchanged, at the owner's option, for a specified numver of shares of the corporations common stock

call feature

feature that allows the corporation to call in, or buy, outstanding bonds from current bondholders before the maturity date

sinking fund

fund to which annual or semiannual deposits are made for the purpose of redeemng a bond issue

serial bonds

bonds of a single issue that mature on different dates