Finances A-Z

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Account balance

The amount of money in a financial account. For example, a bank account balance refers to the amount of money in a bank account. Can also be the amount of money outstanding on a financial account. For example, a credit card balance refers to the amount of money owed to a credit card company.

Accrued interest

Mainly applies to convertible securities. Interest that has accumulated between the most recent payment and the sale of a bond or other fixed-income security. At the time of sale, the buyer pays the seller the bonds price plus accrued interest, calculated by multiplying the coupon rate by the fraction of the coupon period that has elapsed since the last payment. (If a bondholder receives $40 in coupon payments per bond semi-annually and sells the bond one quarter of the way into the coupon period, the buyer pays the seller $10 as the latters proportion of interest earned.)

Adjustable rate

Mainly applies to convertible securities. Refers to interest rate or dividend that is adjusted periodically, usually based on a standard market rate outside the control of the bank or savings institution, such as that prevailing on treasury bonds or notes. Typically, such issues have a set floor or ceiling, called caps and collars, that limit the adjustment.

Adjustable rate mortgage (ARM)

A mortgage featuring predetermined adjustments of the loan interest rate at regular intervals based on an established index. The interest rate is adjusted at each interval to a rate equivalent to the index value plus a predetermined spread (margin) over the index, usually subject to per-interval and to life-of-loan interest rate and/or payment rate caps. An ARM is a long-term loan used to finance a real estate purchase, typically a home. Unlike a fixed-rate mortgage, the interest rate on an ARM changes during its term.

After-tax contribution

Money put into a 401(k) or other employer sponsored retirement savings plan either instead of or in addition to a pretax contribution. You make an after-tax contribution if you've chosen to participate in a Roth 401(k) or Roth 403(b) instead of your employer's traditional tax-deferred 401(k) or 403(b). When you eventually withdraw from your account, the after-tax contributions and earning are not taxed again if you follow the withdrawal rules.

Aggressive-growth fund

Aggressive-growth mutual funds buy stock in companies that show rapid growth potential, including start-up companies and those in hot sectors.

Aging schedule

A table of accounts receivable (broken down into age categories (such as 0-30 days, 30-60 days, and 60-90 days) that is used to determine if customer payments are keeping close to schedule.

American Stock Exchange (AMEX)

Stock exchange with the third largest volume of trading in the U.S. Located at 86 Trinity Place in downtown Manhattan. The bulk of trading on A.M.E.X. consists of index options (computer technology index, institutional index, major market index) and shares of small to medium-size companies is predominant. Recently merged with N.A.S.D.A.Q. See: Curb.

Annual percentage rate (APR)

The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an A.P.R. of 20%.

Annual percentage yield (APY)

The effective, or true, annual rate of return. The A.P.Y. is the rate actually earned or paid in one year, taking into account the affect of compounding. The A.P.Y. is calculated by taking one plus the periodic rate and raising it to the number of periods in a year. For example, a 1% per month rate has an A.P.Y. of 12.68% (1.01^12 -1).