Glossary
Prime Interest Rate
The interest rate commercial banks charge their most credit-worthy or “prime” customers. The prime interest rate is influenced by the federal funds rate.
Principal
The original amount invested in a security, excluding earnings; the face value of a bond; or the remaining amount owed on a loan, separate from interest.
Probate
The court-supervised process in which a deceased person’s debts are paid and any remaining assets distributed to his or her heirs.
Profit-Sharing Plan
A defined-contribution plan under which employees share in company profits. The funds within the plan accumulate tax deferred.
Property
Anything over which a person or business has legal title. Property may be held in common or privately owned.
Prospectus
A legal document that provides the information an investor needs to make an informed decision about an investment offered for sale to the public. Prospectuses are required by and filed with the Securities and Exchange Commission.
Qualified Retirement Plan
A retirement plan that is established and operates within the rules laid down in Section 401(a) of the Internal Revenue Code, and thus receives favorable tax treatment.
Rate of Return
A measure of the performance of an investment. Rate of return is calculated by dividing any gain or loss by an investment’s initial cost. Rates of return usually account for any income received from the investment in addition to any realized capital gains.
Real Estate Investment Trust (REIT)
A pooled investment that invests primarily in real estate. REITs trade like stocks on the major exchanges. Keep in mind that the return and principal value of REIT prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
Redemption
The return of an investor’s principal in a debt security—such as a preferred stock or bond—upon maturity or cancellation by the entity that originally issued the security. Redemption can also refer to the sale of units in a mutual fund.
Clarity Starts Here
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