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Insurance covering all liabilities other than those resulting from the negligent operation of an automobile or those associated with business or professional causes.
A written attachment to an insurance policy to add or subtract coverage.
An extension to a homeowner’s insurance policy that provides coverage for all personal property, regardless of where it’s located. This coverage applies to the policyholder and all household residents except children away at school.
The replacement value of the house less accumulated depreciation (which is the decline in value over time due to wear and tear).
A homeowner’s policy that provides excess liability insurance with protection generally ranging from $1 million to $10 million against lawsuits and judgments.
A provision of homeowner’s insurance that requires the insured to pay a portion of the claim if he or she purchased an inadequate amount of insurance (in this case, less than 80 percent of the replacement cost).
A homeowner’s insurance rule stating that the replacement cost coverage is in effect only if the home is insured for at least 80 percent of its replacement cost. This rule is intended to discourage homeowners from insuring for less than the replacement cost of their homes.
A credit score, based on the same information as your traditional credit score, that is used in determining what your home and auto insurance rates will be.
The amount that you are responsible for paying before insurance coverage kicks in.
An insurance company that distributes its products directly to customers, without the use of agents.
A standardized insurance policy for an individual or family.
Auto insurance liability coverage that combines both bodily injury and property damage liability.
Auto insurance liability coverage that allows for separate coverage limits for bodily injury and property damage, split-coverage limits per person, or both.
Coverage against injuries caused by a hit-and-run driver, an uninsured motorist, or a negligent driver whose insurance company is insolvent.
The portion of auto insurance coverage that provides benefits to cover damages resulting from an accident with another vehicle or object.
The portion of auto insurance coverage for noncollision losses. For example, it would cover damage if the car was hit in a parking lot or if the door was damaged as a result of banging it into a parked car next to it.
A type of auto insurance in which your insurance company protects you in the case of an accident, regardless of who is at fault.
An insurance policy that supplements liability coverage on a homeowner’s and/or automobile insurance policy. This insurance kicks in after the homeowner’s and/or automobile policy coverage run(s) out and provides coverage for claims not covered under homeowner’s insurance such as libel, slander, and invasion of privacy.
An asset that generates value or a return. For example, stocks pay dividends and bonds pay interest, so these are considered investments.
Investment return received directly from the company or organization in which you’ve invested, usually in the form of dividends or interest payments.
Buying an asset whose value depends solely on supply and demand, as opposed to being based on the return that it generates. For example, gold coins and baseball cards are worth more in the future only if someone is willing to pay more for them.
Securities whose value is derived from the value of other assets
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.
The stated amount on the face of a bond, which the firm is to repay at the maturity date.
The interest to be paid annually on a bond as a percentage of par value, which is specified in the contractual agreement
A fractional ownership in a corporation.
A payment by a corporation to its shareholders.
The gain (or loss) on the sale of a capital asset. For example, any return (or loss) from the appreciation (or drop) in value of a share of stock would be considered a capital gain (or loss).
The rate of return earned on an investment, unadjusted for lost purchasing power.
The current or nominal rate of return minus the inflation rate.
The risk of fluctuations in security prices due to changes in the market interest rate.
The risk that rising prices will eat away the purchasing power of your money and that changes in the anticipated level of inflation will result in interest rate changes, which will in turn cause security price fluctuations.
The risk of fluctuations in security prices resulting from good or bad management decisions or how well or poorly the firm’s products are doing in the marketplace.
The risk associated with a company’s use of debt. If a company takes on too much debt and can’t meet its obligations, the company may default, or the value of its stock may drop.
Risk associated with the inability to liquidate a security quickly and at a fair market price.
Risk associated with overall market movements.
Risk resulting from unanticipated changes in the tax or legal environment.
The risk of fluctuations in security prices due to the variability in earnings resulting from changes in exchange rates.
The risk to bondholders that a bond may be called away from them before maturity.
The redeeming of a bond before its scheduled maturity. Many bonds are callable.
The elimination of risk by investing in different assets. It works by allowing the extreme good and bad returns to cancel each other out. The result is that total variability or risk is reduced without affecting expected return.
That portion of a security’s risk or variability that can’t be eliminated through investor diversification. This type of variability or risk results from factors that affect all securities.
Risk or variability that can be eliminated through investor diversification. Unsystematic risk results from factors that are unique to a particular firm.
An attempt to ensure that the investor’s strategy reflects his or her investment time horizon and that the investor is well diversified, generally with assets in several different classes of investments, such as domestic common stocks, international common stocks, and bonds.
A market in which all relevant information about the stock is reflected in the stock price.
A term used to describe a place where financial securities or instruments—for example, common stocks and bonds—are traded.
A market in which newly issued, as opposed to previously issued, securities are traded.
The first time a company’s stock is traded publicly.
A stock offering by a company that already has common stock traded in the marketplace.
The middleman between the firm issuing securities and the buying public. This term describes both the firms that specialize in selling securities to the public and the individuals who work for investment banking firms.
An investment banker who purchases and subsequently resells a new security issue. The issuing company sells its securities directly to the underwriter, who then sells the issue to the public and assumes the risk of selling the new issue at a satisfactory price.
A legal document that describes a securities issue and is made available to potential investors.
The markets in which previously issued securities are traded.
An exchange that occupies a physical location where trading occurs, such as the New York Stock Exchange.
A market in which transactions are conducted over the telephone or via a computer hookup rather than in an organized exchange.
The highest price someone is willing to pay for a security.
The lowest price at which someone is willing to sell a security.
Excessive trading in a security account that is inappropriate for the customer and serves only to generate commissions.
A group or lot of 100 shares of common stock. Stocks are traded in round lots on the New York Stock Exchange.
An order involving between 1 and 99 shares of stock.
A trading order that expires at the end of the trading day during which it was made.
A trading order that remains effective until filled or cancelled.
An account that gives your broker the power to make trades for you.
A trading order which if not filled immediately expires.
An order to buy or sell a set number of securities immediately at the best price available.
An order that specifies a securities trade is to be made only at a certain price or better.
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.
Borrowing stock from your broker and selling it with an obligation to replace the stock later.
The percentage that an investor must have on deposit with a broker when selling short.
Comprehensive financial services package 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 debt (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.
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