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2017-04-25 12:24

Financial Glossary

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Cash equivalents

Assets that can easily and quickly be converted to cash. Cash equivalents include bank accounts, Treasury bills, short-term bonds, money market funds, notes and receivables.

Cash value

The investment portion of a permanent life insurance policy. The cash value will earn interest during the policyholder’s life. The cash value can be used as a tax-sheltered investment, to borrow against, to pay policy premiums or to pass on to heirs.

Closed-end fund

A fund that will only issue a set number of shares. A closed-end fund operates more like a stock than a typical fund. The fund will issue a fixed number of shares in an initial public offering (IPO). After that time, shares of the fund are listed and traded on a stock exchange.

Codicil

A legal change to a will. A codicil can add to, subtract from, alter or explain elements of an existing will.

Common stock

A security that represents ownership in a corporation. Common stockholders are able to vote on company matters, such as membership of the board of directors and company policy. They also earn a share of the company’s profits in the form of dividends or capital appreciation. Should the corporation liquidate, common stockholders are entitled to the company’s assets only after all other parties, including creditors, bondholders and preferred shareholders, have been paid in full.

Compounding

The process where the value of an investment increases exponentially over time. During each interest period, the investor earns interest on both the principal and all interest accumulated up to that point in time.

Credit bureau

An agency that researches and collects credit information about individuals and makes it available to creditors and potential creditors. The creditors and potential creditors then use that information to make an informed decision about whether or not to extend credit to a given individual. Banks, credit card companies and mortgage providers are common credit bureau customers.