Finance | Chapter 12

Debenture

A type of corporate bond that is backed by a company's reputation rather than its assets

Loaded Fund

A mutual fund in which you pay commission every time you buy or sell shares

Convertible Bond

A bond that an investor can trade for shares of the stock and usually has lower interest rate

Capital Gain

The profit that results from an increase in value when an investor sells shares in a mutual fund

Mortgage Bond

Is also called a secured bond because it is backed by a corporation's assets

Face Value

The dollar amount that a bond holder will be paid when the bond matures

Maturity Date

The time frame when an investment becomes due for its face value

12b-1 Fees

Helps pay for marketing and advertising of a mutual fund

General Obligation Bond

Back by the full faith and credit of the government that issued it

Family of Funds

Allows investors to adjust their investment conveniently to achieve a different financial objective

Registered Bonds

A bond that is registered in the owner's name by the issuing company

Bearer Bond

A bond that is not registered in the investor's name

Yield

A rate of return earned by an investor who holds a bond for a certain amount of time

Open-ended Funds

Has an unlimited number of shares that are issued and redeemed by an investment company at the request of investors

Net Asset Value (NAV)

Amount that 1 share of a mutual fund is worth

Serial Bonds

Corporations may issue a group of these bonds at 1 time but they will have different maturity dates so the repayment can be made over time

Closed-end Funds

A mutual fund with a fixed number of shares

Coupon Bond

A bond that is registered in the owner's name for only the face value but anyone with the detachable coupons may collect the interest

Exchange-traded Fund (ETF)

Fund that invests only in securities or stocks from a specific index

Zero-coupon Bond

A bond that does not pay interest but it is sold for well below face value to insure a profit at maturity

Sinking Fund

A corporation can make deposits into this to use later for paying back a bond issue

Income Dividends

The earnings a mutual fund pays to shareholders

Municipal Bonds

Bonds issued by state and local governments to pay for projects such as road repairs or building new schools

Investment-grade Bonds

Bonds that are issued by financially stable companies and are considered safe by conservative investors