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capital markets

A general term encompassing all markets for financial instruments with more than one year to maturity.

capital stock

All ownership shares of a company, both common and preferred listed at par value.

cash equivalents

Assets that can be quickly converted to cash. These include receivables, treasury bills, short-term commercial paper, short-term municipal and corporate bonds and notes.

cash value

Permanent life insurance policies provide both a death benefit and in an investment component called a cash value. The cash value earns interest and often appreciates. The policyholder may accumulate significant cash value over the years and, in some circumstances, "borrow" the appreciated funds without paying taxes on the borrowed gains. As long as the policy stays in force the borrowed funds do not need to be repaid, but interest may be charged to your cash value account.

certificate of deposit (cd)

A Certificate of Deposit is a low risk, often federally guaranteed investment offered by banks. A CD pays interest to investors for as long as five years. The interest rate on a CD is fixed for the duration of the CD term.

charitable remainder trust (crt)

The Charitable Remainder Trust is an irrevocable trust with both charitable and non-charitable beneficiaries. The donor transfers highly appreciated assets into the trust and retains an income interest. Upon expiration of the income interest, the remainder in the trust passes to a qualified charity of the donor's choice. If properly structured, the CRT permits the donor to receive income, estate, and/or gift tax advantages. These advantages often provide for a much greater income stream to the income beneficiary than would be available outside the trust.

closed-end fund

A fund whose value is held within a fixed number of shares. Until the fund is wound up, shares can be bought and sold on the stock exchange or the over-the-counter market.

co-borrower

A co-borrower is individually or jointly obligated to repay a loan entered into with a third party. The co-borrower may or may not share in ownership of loan collateral.

codicil

An instrument in writing executed by a testator for adding to, altering, explaining or confirming a will previously made by the testator; executed with the same formalities as a will; and having the effect of bringing the date of the will forward to the date of codicil.

collateral

Assets pledged as security for a loan. If the borrower defaults on payment, the lender may dispose of the property pledged as security to raise money to repay the loan.

commission

The fee a broker or insurance agent collects for administering a trade or policy.

commodity

A commodity is a physical substance such as a food or a metal which investors buy or sell on a commodities exchange, usually via futures contracts.

common stock

A security that represents ownership in a corporation.

compounding

The computation of interest paid using the principal plus the previously earned interest.

conduit IRA

An individual who rolled over a total distribution from a qualified plan into an IRA can later roll over those assets into a new employer's plan. In this case the IRA has been used as a holding account (a conduit).

conforming loan

A mortgage loan that conforms to Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines. Currently, conforming first mortgages are under $275,000 ($413,000 in Alaska and Hawaii).

construction loan

A construction loan is a short term loan applied to the construction of a new home. The builder gradually withdraws the loan proceeds and the home serves as collateral on the loan.

consumer debt

Debt incurred for consumable or depreciating non-investment assets. Items include credit card debt, store-financed consumer purchases, car loans, and family loans that will be repaid.

contrarian

An individual whose opinion is the opposite of the majority.

conventional mortgage

A conventional mortgage is not insured, guaranteed or funded by the Veterans Administration, the Federal Housing Administration, or Rural Economic Community Development.

convertible mortgage

A convertible mortgage is an adjustable mortgage (ARM) that allows the borrower to convert to a fixed rate mortgage during a specified period of time.

convertible term insurance

Term life insurance that can be converted to a permanent or whole life policy without evidence of insurability, subject to time limitations.

corporation

A legal business entity created under state law. Because the corporation is a separate entity from its owners, shareholders have no legal liability for its debts.

correction

A sudden decline in stock or bond prices after a period of market strength.

co-signer

An individual or party who agrees to assume a debt obligation of a third party in the event the principal borrower defaults on the terms of the loan.

coupon rate

The rate of interest paid on a bond, expressed as a percentage of the bond's par value.

credit cards

Cards such as Visa and MasterCard allow the holder to charge purchases rather than pay cash.

credit bureau repositories

A credit bureau repository is an organization that compiles credit history information directly from lenders and creditors into credit summaries and reports. These reports are made available to lenders and creditors to assist them in gauging an individual's credit worthiness.

critical illness insurance

Insurance protection designed to provide a lump-sum payment equal to the full value of the policy or a percentage of the policy depending upon the product design, to the insured/policy owner upon the diagnosis of a covered critical illness. Typical illnesses covered include heart attack, stroke, cancer, paralysis, renal failure and Alzheimer's disease. Many policies offer a partial payment for certain medical procedures such as coronary bypass surgery or angioplasty. Some policies offer a return of all premiums in the event of death of the insured, others pay the full benefit upon the insured's death.

currency risk

The level of risk when investing in international markets, due to the fluctuations in exchange rates of the various world currencies. Investing in any foreign country should be preceded by a careful estimation of how well its currency is likely to do against the dollar.

custodian

A financial institution, usually a bank or trust company, that holds a person or company's cash and or securities in safekeeping.

cyclical companies

Companies that report strong earnings when the overall economy is doing well and weaker earnings when the economy is in recession