Consumers ed unit 4

corporation

large business organization with the legal status of one person

proprietorship

business owned by one person

stocks

shares of ownership

dividends 

payments to the stockholders 

partnership

business owned by a small group of people

initial public offering

corporations first sale of stock

primary stock market

people who buy stocks at an initial public offering trade

secondary stock market

trade of stock between investors

common stock

right to vote on company decisions

preferred stockowners

receive regular fixed dividends but down vote on company decisions

bond

agreement in which you lend money to a corporation or government 

corporate bonds

raise money 

municipal bonds

state and local governments issue these bonds

US government bonds

most secure bonds the least likely to default in repayment

mutual fund

investment made by a large group

bull market

rising stock prices 

bear market 

falling stock prices 

rollover

transferring funds from one retirement account to another without paying taxes on them

defined benefit plan

retirement plan that makes regular benefits 

defined contributions plan

benefits are not guaranteed to last a lifetime

401(k) plan

allows workers to put money in tax deferred investments

403 (B) plan

people who work in nonprofit organizations schools colleges and libraries these plans are tax deferred and allow workers to invest in a variety of options

457 plan

government employees the account is tax deferred

tax deferred

you don’t have to start paying interest until you start receiving income

roth 401(k) plan

worker makes contributions with money that has already been taxed so withdrawals are Not taxed this is the opposite of a tax deferred plan 

traditional IRA

worker puts money into the account which earns intreats and grows, interest is tax deferred and you can deduct however their are a few catches: under 50 can’t put more than 6000 each year over 50 is 7000

Roth IRA

cannot deduct contributions from your taxable income but qualified withdrawals are not taxed 

annuity

contract with an insurance company that pays regular income for a set time

estate

persons total assets and liabilities

will

legal document that outlines what will happen to your property

living will

statement of instructions regarding medical treatment

power of attorney

gives another person authority to make legal decisions if incapacitated

trust

an agreement that allows another person to administer your assets

probate

paying someones debts and dividing his or her assets after death

executor

representative 

credit

an agreement that involves going into debt

debit card

automatically takes money out of your own account

credit card

credit card company pays for your purchase and sends you a bill

creditor

lender

debtor

borrower

balance

total amount you owe

minimum payment due

you must pay for the current billing cycle

annual percentage rate

to figure interest (principal x rate x time)

closed end credit

loan for a set amount of money 

open end credit

lets a borrower use and amount of credit over a period of time

general purpose cards

are issued by financial institutions also called bank cards

store credit card

only good at the store that issues the card

travel and entertainment cards

only good for certain expenses typically relating to vacations

Collateral

property that may be taken if payments aren’t made

garnish

requiring employers to withhold part of a workers pay to cover debts

lien

legal claim on property

credit report

record of a persons credit history 

credit rating

evaluation of someones ability to repay borrowed money

chapter 7 bankruptcy

a person must undergo a means test

chapter 13 bankruptcy 

for people who have some source of income