PERSONAL FINANCE

EXAM F

ZERO COUPON BOND

• What Does Zero-Coupon Bond Mean?A debt security that doesn't pay interest (a coupon) but is traded at a deep discount, rendering profit at maturity when the bond is redeemed for its full face value.

• $5K----18 YRS $20K

TAX SHELTER

• What Does Tax Shelter Mean?A legal method of minimizing or decreasing an investor's taxable income and, therefore, his or her tax liability. Tax shelters can range from investments or investment accounts that provide favorable tax treatment, to activities or transactions that lower taxable income. The most common type of tax shelter is an employer-sponsored 401(k) plan.

MEDICARE• A U.S. federal health program that subsidizes people who meet one

of the following criteria:

1. An individual over the age of 65 who has been a U.S. citizen or permanent legal resident for five years.

2. An individual who is disabled and has collected Social Security for a minimum of two years.

3. An individual who is undergoing dialysis for kidney failure or who is in need of a kidney transplant.

4. An individual who has Amyotrophic Lateral Sclerosis (Lou Gehrig's disease).

Medicare helps out people at a time in their lives when they may have serious health problems but lack the funding for treatment.

Medicaid

• What Does Medicaid Mean?A joint federal and state program that helps low-income individuals or families pay for the costs associated with long-term medical and custodial care, provided they qualify. Although largely funded by the federal government, Medicaid is run by the state where coverage may vary.

LONG TERM CARE

• Coverage that provides nursing-home care, home-health care, personal or adult day care for individuals above the age of 65 or with a chronic or disabling condition that needs constant supervision. LTC insurance offers more flexibility and options than many public assistance programs.

Medicare• Medicare///aid Who Is Eligible Medicare

covers almost everyone 65 or older, certain people on Social Security disability, and some people with permanent kidney failure. Medicaid covers low-income and financially needy people, including those over 65 who are also on Medicare. Who Administers the Program Medicare is a federal program whose rules are the same all over the country. Medicare information is available at your Social Security OFFICE

Medicaid

• .Medicaid is administered by the 50 states; rules differ in each state. Medicaid information is available at your local county social services, welfare, or department of human services office.

• In some states, Medicaid charges consumers small amounts for certain services.

OPEN END CREDIT

• Open end credit is an agreement by a lender to lend a specific amount to a borrower and to allow that amount to be borrowed again once it is repaid. This is also known as a revolving line of credit.

• Some examples of Open end credit include:• Credit Cards • Home Equity Credit Lines • Store Specific Credit Cards • PAY INTEREST ON CASH OUTSTANDING

CAPITAL GAIN

• An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. A capital gain may be short term (one year or less) or long term (more than one year) and must be claimed on income taxes. A capital loss is incurred when there is a decrease in the capital asset value compared to an asset's purchase price.

INVESTMENT

• An asset or item that is purchased with the hope that it will generate income or appreciate in the future. In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or appreciate and be sold at a higher price.

When would a corporation buy back bonds

• When the rate it was issued @ is greater than the current rate the company is offering.

• Sold @ 5% 2009

• Selling @ 3% 2010

• Company buy back

Opportunity cost

• The cost of passing up the next best choice when making a decision. For example, if an asset such as capital is used for one purpose, the opportunity cost is the value of the next best purpose the asset could have been used for. Opportunity cost analysis is an important part of a company's decision-making processes, but is not treated as an actual cost in any financial statement.

Pawnshop

• A pawnbroker is an individual or business (pawnshop or pawn shop) that offers secured loans to people, with items of personal property used as collateral.

PAWNSHOP

• Unlike other lenders, though, the pawnbroker does not report the defaulted loan on the customer's credit report, since the pawnbroker has physical possession of the item and may recoup the loan value through outright sale of the item. The pawnbroker/secondhand dealer also sells items that have been sold outright by customers to the Pawnbroker or secondhand dealer.