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Back-end
load fund
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This type of mutual
fund charges a redemption fee when the shares in the fund are
eventually sold by the investor. This fee is also often called a
deferred sales charge (DSC). It may be calculated based on the
original investment cost, or on the market value
of the investment at the time of redemption. The percentage
amount of this fee is usually reduced each year that the fund is held,
and can be zero if the fund is held long enough. Many back-end
load funds will allow a portion of the investment to be redeemed each
year without charge. Also, as with all mutual funds, trailer
fees are paid annually by the fund to the advisor, broker or
dealer where you hold your funds. See also front-end
load fund, and no-load fund.
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Balance sheet
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A balance sheet is part of the financial statements. The balance sheet reports the
amounts of assets, liabilities, and
owners'
equity at a specific date. The total of all assets is always equal to the total of
liabilities plus owners' equity. This is a function of the
double-entry accounting system.
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Bankers'
acceptance
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A bankers' acceptance is a
short term debt instrument guaranteed by a bank, and sold through a
brokerage company to investors.
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Basis of assets
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Basis includes the original purchase price, and
all costs related to the purchase of an asset. Events during
your ownership of the asset could result in an adjusted basis.
For instance, your basis would be increased by the cost of
improvements, or decreased by allowable depreciation. See the
Internal Revenue Service (IRS) Topic
703 - Basis of Assets.
The basis of an investment in
securities would include the purchase price, as
well as any commissions or fees paid. The basis of an interest-paying
investment such as a bond would include any
amount paid for interest accrued since the last
interest payment date. When the accrued interest is paid to you,
it is used to reduce the basis of your bond. See the IRS Publication
550, Investment Income and Expenses.
The basis of assets such as machinery or equipment would include
installation costs, customs brokerage and legal
fees, and any other costs expended to get the
asset into operation. The basis of your asset is used to
calculate deprecation, amortization, and any gain or loss on the
disposal of the property.
The adjusted basis of a rental property would
include any improvements that cannot be
expensed for tax purposes. Improvements increase the value or
the life of the property. Examples of improvements would be a new roof, new
appliances, etc. See the IRS Publication
527, Residential Rental Property.
There may be costs related to any asset (for
instance, major repairs that extend the life of
the asset) that must be added to the adjusted basis instead of being expensed.
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Basis point
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A basis point is 1/100th of 1%, or
.01% (.0001), and is used to refer to changes in
interest rates, such as the Federal Reserve Board discount rate, or the
yield rate
on bonds. |
Bear market
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A bear market
is a declining market (prices are falling).
A person who expects that the market will decline
is called a bear.
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Bearer security
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A financial instrument, such as a
bond, stock or other security that is not
registered in any name. This means it is
cashable by the person physically holding it.
See also street name. |
Bid/ask
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The bid price on a security is
the price that a prospective buyer is willing to pay, and the ask price is
the price that a prospective seller is willing to accept.
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Blue chip
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A blue chip stock is a stock which
has a long record of being high quality, in terms
of stability, dividends, earnings, etc.
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Board lot
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A board lot is usually 100
shares. Trades on stock markets are usually
made in multiples of a board lot. See also
odd lot.
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Bond
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A bond is interest-bearing
debt issued by corporations, governments and institutions, with the principal
(face value) to be repaid at a
specified date (or dates) in the future. Interest is to be paid
on the principal at a specified rate per period. Bonds may be
secured (backed by a claim on specific assets) or unsecured (backed by
the issuer but not by any specific collateral). Bonds may be
sold for more (at a premium) or less (at a
discount) than their face value. See also bond
discount, bond premium,
and strip bond.
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Bond discount
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When a bond sells for less
than its face value, it is sold at a discount. The discount is
the difference between the face value and the purchase price.
Bonds sell at a discount when their coupon rate (rate of interest paid
based on the face value of the bond) is less than the current market
rate for that type of bond. When long term interest rates rise,
bond prices generally decrease.
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Bond premium
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When a bond sells for more
than its face value, it is sold at a premium. The premium is the
difference between the purchase price and the face value. Bonds
sell at a premium when their coupon rate (rate of interest paid based
on the face value of the bond) is greater than the current market rate
for that type of bond. When long term interest rates drop, bond
prices generally increase.
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Book
value (of an asset)
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The book value of depreciable assets
such as buildings, machinery and equipment is original cost less accumulated depreciation.
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Book value per share
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This is the total
shareholders' equity (as stated on the balance
sheet), divided by the total number of common shares
outstanding
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Bull market
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A bull market is a rising market (prices rising). A person
who expects that the market will rise is called a
bull.
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Revised: February 20, 2009
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