Investment Vehicles, Credit Systems, and Interest Calculations

Comprehensive vocabulary flashcards covering retirement accounts, investment options, credit types, loan terms, and interest definitions from the lecture notes.

Bonds (Government)

Debt securities sold by the U.S. government that can be held for up to $30$ years, whose rate of return does not outpace inflation.

401(k)

A retirement account created through an employer who often matches contributions, funded with pre-tax dollars, and subject to federal contribution limits and early withdrawal penalties.

IRA (Individual Retirement Account)

A retirement account set up by individuals that can be established as pre-tax or after-tax, featuring federal contribution limits and penalties for early withdrawals.

Cash Investments

A method of investing saved money through bank accounts and certificates of deposit (CDs).

Bonds (General)

Loans provided by an investor in exchange for interest payments.

Stocks

Investments that represent shared ownership in companies.

Mutual Funds

Investment vehicles composed of pooled groups of stocks.

Real Estate

An investment category consisting of houses, buildings, and land.

Commodities

An investment category consisting of raw resources such as energy, food, and natural materials.

Diversification

The practice of putting money into more than $1$ kind of investment at a time.

Liquidity

A measure of how easily an investment can be exchanged for cash.

Outstanding Transactions

Transactions that did not reach the bank before the date of the bank statement.

Default

The act of stopping payment on a debt completely.

Credit Bureaus

The three agencies—TransUnion, Equifax, and Experian—that collect and organize data for credit reports.

Credit Report Information

Information compiled by credit bureaus, consisting of personal info, public records, collection agency reports, credit accounts, and inquiries.

Open-End Credit (Revolving Credit)

Credit that is repeatedly borrowed, such as credit cards, which may include grace periods, annual fees, reward programs, and interest rates based on credit history.

Grace Period

An extension period after the due date that protects the borrower from penalties.

Closed-End Credit

A loan that must be repaid in full by a specific date, typically used for large purchases like car loans or home loans, with interest rates based on credit history.

Easy-Access Credit

Short-term loans not dependent on credit history—such as payday loans and title loans—characterized by high interest rates, large fees, and required collateral, commonly used for emergencies.

Collateral

A valuable item or asset provided to a lender as security for a loan, which the lender keeps if the borrower does not repay.

APR (Annual Percentage Rate)

The annual interest rate charged for borrowing money from a financial institution.

Personal Loan

A lump sum of money lent with terms of repayment agreed upon prior to borrowing.

Mortgage Loan

An agreement to make regular payments over a long period of time to finance real estate.

Auto Loan

A type of credit financing used to purchase a vehicle, structured similarly to a mortgage loan.

Down Payment

Upfront cash paid when buying something on credit, which reduces the amount financed, lowers monthly payments, shortens loan length, motivates repayment, appeals to lenders, and may lower interest rates.

Secured Credit

Credit backed by a valuable asset that the lender may seize if the loan is not repaid properly, representing lower risk for the lender.

Unsecured Credit

Credit that is not backed by a valuable asset, posing higher risk to lenders.

Simple Interest

Interest paid solely on the principal borrowed, computed using the formula $A = (P)(r)(t)$, where $A$ is accumulated interest, $P$ is principal borrowed, $r$ is annual interest rate, and $t$ is number of years borrowed.

Compound Interest

Interest paid on both the initial principal and on the interest that has already accrued.