testing SEC & INV

trial 2

FICA

Federal Insurance Contributions Act; the money deducted from your paycheck for Social Security and Medicare.

W2

A form that employers must send to employees by January 31st, showing total money made and taxes withheld.

Sales tax

A tax on purchases, also known as consumption tax, sometimes used to reduce demand for products.

Excise tax

Taxes on specific goods like gasoline and cigarettes, also known as luxury tax.

Property tax

A tax assessed on property owned such as land or a house or motor

Social Security Tax

A tax that helps provide income for retirees.

Income Tax Day

April 15th, the deadline for filing income tax returns.

Income tax

A progressive tax based on income earned from work and interest.

W4

An employee's withholding certificate for determining tax withholding.

IRS

Internal Revenue Service; the federal agency responsible for tax collection.

Local Government

Government level responsible for local services such as public education.

Tax deduction

An expense or donation that can reduce taxable income.

Tax credit

An amount subtracted directly from the tax owed.

Exemptions

Allow some income to be exempt from tax based on household size.

Dependents

Individuals who rely on a taxpayer's income.

Itemized deductions

Amounts actually spent on tax-deductible expenses.

Standard deductions

A fixed amount that reduces taxable income without itemizing.

Taxable income

The portion of income subject to income tax.

Tax credit

Subtracted directly from taxes owed.

Community

A group of people with common interests who benefit from taxes.

Earned income

Income derived from work.

Payroll tax

A tax on earned income supporting Social Security and Medicare.

Social Security

Income provided to retirees and people with disabilities.

Interest rate risk

The risk that interest rates rising will decrease bond market values.

Maturity date

The date a bond pays out its principal.

Nominal yield

The interest rate stated on a bond certificate.

Discount bond

A bond that trades below its par value.

Premium bond

A bond bought for more than its par value.

Investment grade

A bond rated at least BBB or Baa, indicating low default risk.

High yield

Bonds offering a higher rate of interest due to higher default risk.

Sinking fund

An account to ensure bond principal can be returned at maturity.

Debenture

A bond backed only by the issuer's credit.

Bearer bonds

Unregistered bonds that can be redeemed by whoever holds them.

Liquidity risk

The risk of not being able to sell an asset quickly without a loss.

Wash Sale

Selling a security at a loss and buying a substantially identical one within 30 days.

Net Investment Income Tax

3.8% tax on certain types of investment income for high income earners.

Exchange Traded Funds

Investment funds traded on stock exchanges, unlike mutual funds.

Blue Chip Stocks

Stocks of large, well-established companies known for profitability.

Credit Default Swap

An insurance policy against the default risk of a bond.

Growth Stocks

Stocks expected to grow at an above-average rate compared to the market.

Capital gains tax

A tax on profits made from selling an asset.

401(k)

An employer-sponsored tax-deferred retirement account.

Trustee

The person or entity responsible for managing a trust.

Revocable Living Trust

A trust that can be altered during the grantor's lifetime.

Beneficiary

A person entitled to receive benefits from a trust.

Insurance premium

The payment made for coverage provided by an insurance policy.

Amortization

The process of spreading out a loan into a series of fixed payments.

Mortgage Insurance

Insurance that protects lenders in case of borrower default.

Title fees

Fees related to transferring property ownership.

Lapse

Termination of an insurance policy for non-payment.

Casualty Insurance

Insurance that covers loss from unforeseen events.

Endorsement

An amendment to an insurance policy that changes its terms.

Collar

An agreement that limits how much interest rates can drop.

Eurobonds

Bonds issued in a currency not native to the country where they are issued.

Zero Coupon Bond

A bond sold at a discount that pays no interest but matures at face value.

Tax-free municipal bond yield

Return on certain municipal bonds that are not subject to federal taxes.

Prospectus

A document detailing potential investments in a security offering.

Accumulation Period

The time during which an insured incurs costs necessary to qualify for benefits.

Blue Sky Laws

State regulations to protect investors from fraud.

Non-NASDAQ OTC

Securities traded in the over-the-counter market that do not meet NASDAQ requirements.

Futures

Contracts to buy or sell assets at a future date.

Insider trading

The illegal buying or selling of securities based on non-public information.

Credit risk

The possibility of a loss from a borrower's failure to repay a loan.

Interest Rate Risk

The risk that rising interest rates will decrease the value of existing bonds, as newer bonds may offer higher yields.

Inflation Risk

The risk that inflation will reduce the purchasing power of fixed income investments.

Liquidity Risk

The risk of not being able to sell an asset quickly without incurring a significant loss.

Call Risk

The risk to bondholders that their bonds may be redeemed early, usually when interest rates fall.

Series EE Bonds

Savings bonds sold at face value that accumulate interest electronically, with a maximum purchase limit of $10,000.

Series I US Savings Bonds

Savings bonds that are indexed to inflation and offer a fixed interest rate that adjusts with inflation.

General Obligation Bonds

Bonds issued by municipalities backed by their full faith and credit, without specific assets securing them.

Revenue Bonds

Bonds secured by the revenue generated from specific projects rather than by the taxing power of the issuing government.

Futures

Contracts to buy or sell assets at a specified future date for a price agreed upon today.

Options

Contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a specified price before a certain date.

Assignment

The obligation of the seller to fulfill an option contract when the buyer exercises their rights.

Holder

The buyer of an option contract.

Writer

The seller of an option contract.

Credit Swap

A derivative contract where two parties exchange cash flows or liabilities related to different financial instruments.

Interest Rate Swaps

Contracts where two parties exchange cash flows based on a notional principal amount to hedge against interest rate risk.

Commodity Swaps

Swaps involving the exchange of floating prices for a commodity.

Currency Swap

An agreement where parties exchange interest payments on debt denominated in different currencies.

Debt-Equity Swap

A transaction in which debts of a company are exchanged for its equity, usually stocks.

Total Return Swap

A contract where one party pays the total return on a security, often used as a credit derivative.

Credit Default Swap

An insurance policy against the default risk of a bond or loan.

Derivative

A financial contract whose value depends on the price of an underlying asset.

Financial Services and Markets Act

UK legislation that created a regulatory framework for financial services, including the establishment of the FSA.

Insider Trading

The illegal practice of trading stocks based on confidential, non-public information.

Data Protection Act

UK legislation that governs the collection and use of personal data.

FINRA

The Financial Industry Regulatory Authority, responsible for regulating securities firms in the US.

SEC

The Securities and Exchange Commission, which enforces laws regarding securities and oversees financial advisors.

FASB

The Financial Accounting Standards Board, which establishes accounting principles in the US.

Dodd-Frank Act

Legislation aimed at reducing risks in the financial system following the 2008 financial crisis.

National Banking Act of 1863

Established a system of federally chartered banks called National Banks.

Federal Reserve Act

The 1913 law that created the Federal Reserve System, controlling the money supply in the US.

Glass-Steagall Act

The 1933 act that established the FDIC and regulated banking practices, repealed in 1999.

Depository Institutions Deregulation

The act that deregulated financial institutions accepting deposits and strengthened the Fed's monetary control.

Commission

A fee paid to a broker based on a percentage of their transactions.

Fee

A flat rate charged for managing money or services.

Churning

The unethical practice by brokers of excessive trading to generate commissions.

Cash Value

The amount a whole life policyholder would receive upon surrendering the policy before death or maturity.

Premium

The payment made for insurance coverage, based on various risk factors.