PERSONAL FINANCE

EXAM E

Face value, Death benefit, Face amount

• The "face value" of a life insurance policy is the death benefit. However it's subject to other clauses in the policy. Examples:If the policy has a "double indemnity" clause, the beneficiary receives double the face value in case of accidental death.

FYI

• Not all life insurance earns interest or dividends and some term policies have a "decreasing face value" clause or payout based on the aging of the insured each year. ".

AUTO INSURANCE, HOMEOWNER INSURANCE

• Coverage expires: 12:01 AM on expiration date.

• Expiration Date 1 March 2011

• Auto accident, House fire, Robbery

• 1 March 2011 @ 10 AM

• NOT COVERED—NO INSURANCE

• February 28, 2010 11:45 PM– YES COVERAGE—YOU ARE COVERED

CASH VALUE WHOLE LIFE INSURANCE

• Whole Life Insurance is designed to provide coverage for the life of the insured. Whole life policies generally offer fixed premiums, guaranteed death benefits and are designed to build tax deferred cash value.

FYI

• For that reason, a whole life insurance

• policy can be described as providing life

• insurance protection with a savings

• feature. PREMIUM PD + INTEREST

• EARNED

EXEMPT FROM STATE & LOCAL TAX

• INTEREST

• RATE

• ON

• US

• SAVINGS

• BONDS

DIVIDEND REINVESTMENT PLAN

• A dividend reinvestment program or dividend reinvestment plan (DRIP) is an equity investment option offered directly from the underlying company. The investor does not receive quarterly dividends directly as cash; instead, the investor's dividends are directly reinvested in the underlying equity. ACQUIRE ADDITIONAL SHARES OF STOCK

STOCK SPLIT

• A stock split is a decision by the company's board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split, every shareholder with one stock is given an additional share.

FYI

• So, if a company had 10 million shares outstanding before the split, it will have 20 million shares outstanding after a 2-for-1 split. 

STOCK SPLIT

• A stock's price is also affected by a stock

• split. After a split, the stock price will be

• reduced since the number of

• shares outstanding has increased.

FYI

• In the example of a 2-for-1 split, the share

• price will be halved. Thus, although the

• number of outstanding shares and the

• stock price change, the market

• capitalization remains constant.

Security Exchange Commission

• The mission of the U.S. Securities and

• Exchange Commission is to protect

• investors, maintain fair, orderly, and

• efficient markets, and facilitate capital

• formation. Police of security industry.

• .

FYI

• A company must register with the SEC

• BEFORE IT CAN RASISE CAPITAL BY

• SELLING STOCK & BONDS

SEC

• The Securities and Exchange Commission

•

• (SEC) is charged with protecting investors

• and maintaining fair and efficient capital markets.

FYI

• SEC regulations govern the activities of individuals and organizations involved in the sale of securities, including brokers and brokerage firms.

• The SEC operates at a high level, however, and does not recoup losses for individual investors.

Time Value of Money (TVM)

• Investopedia explains Time Value of Money (TVM)Everyone knows that money deposited in a savings account will earn interest. Because of this universal fact, we would prefer to receive money today rather than the same amount in the future.

TVM

• For example, assuming a 5% interest rate, $100 invested today will be worth $105 in one year ($100 multiplied by 1.05).  Conversely, $100 received one year from now is only worth $95.24 today ($100 divided by 1.05), assuming a 5% interest rate.

CERTIFICATE OF DEPOSIT

• Investopedia explains Certificate Of Deposit - CDA certificate of deposit is a promissory note issued by a bank. It is a time deposit that restricts holders from withdrawing funds on demand. Although it is still possible to withdraw the money, this action will often incur a penalty. 

TVM—10K TODAY OR 10 K 3 YRS FROM NOW

• If you're like most people, you would choose to receive the $10,000 now.

• So at the most basic level, the time value of money demonstrates that, all things being equal, it is better to have money now rather than later.

INTEREST RATE

• Investopedia explains Interest RateInterest is charged by lenders as compensation for the loss of the asset's use.

FYI

• In the case of lending money, the lender could have invested the funds instead of lending them out. With lending a large asset, the lender may have been able to generate income from the asset should they have decided to use it themselves.

INFLATION

• What Does Inflation Mean?The rate at which the general level of

• prices for goods and services is rising,

• and, subsequently, purchasing power is falling.

FYI

• Central banks attempt to stop severe

• inflation, along with severe deflation, in an

• attempt to keep the excessive growth of prices to a minimum.

FYI

• Central banks attempt to stop severe

• inflation, along with severe deflation, in an

• attempt to keep the excessive growth of prices to a minimum.

INFLATION

• Investopedia explains Inflation

• As inflation rises, every dollar will buy a

• smaller percentage of a good. For

• example, if the inflation rate is 2%, then a

• $1 pack of gum will cost $1.02 in a year.

INSURANCE PERSONAL FLOTER

• What Does Floater Insurance Mean?

• A type of insurance policy that covers property that is easily movable and

• provides additional coverage over what normal insurance policies do not.

FYI

• This can cover anything from jewelry to

• expensive stereo equipment. COST

• ADDITIONAL PREMIUM!!!!!!