management 4

corporate: loans and deposits btwn businesses

retail: loans and deposits btwn individuals

investment: help customers, businesses and gov raise money

investment rate will remain the same for the life of the loan

long term, 15-30 years

use if plan to stay in home more than 5 years, want a loan with a low down payment, want consistent payments 

lower interest rate for an initial period then rate fluctuates

good for short term, 30 year loan with annual interest rate anjustments after 5 year fixed rate period

good for those who want lower initial monthly payments or planning on moving in less than 5 years

adjustable mortgage, people couldn't pay after the initial low rate was raised 

closing costs: 3-5% or total loan including attourney fees, title insurance, appraisals, tax

aka discount points

paid before closing in exchange for a lower interest rate on the mortgage 

usually required and are 20% of purchase price 

credit cards and mortgage payments should not amount to more than 36% of your gross monthly income 

amt spent to service debt each month/ your income 

borrowers credit history

prime rate (amount banks charge best customers)

penalty rates and special interest rate offers 

range 300-850

• payment history- pay on time 35%
• amount owed- max out cards and lower score 30%
• length of credit history 15%
• new credit- more cards causes a lower score 10%
• types of credit used-not just credit cards better 10% 

annual percent of principal that is charged to the borrower

simple or compounded 

interest calculated only on the principal amount 

on the portion of the principal amount that remains unpaid

interest paid on the principal and on the accumulated interest that has been earned by the principal 

interest rate banks charge preferred customers

better to have the money in your hand today rather than in the future 

• retirement savings account
• pre tax contributions made by employee and employer matches 3-5%

tax deferred unless you cash out 

mutual funds, stocks, bonds, money market investments

• leave in the former plan
• roll into new employer plan
• cash out and pay penalties 

• tax deferred retirement plan
• offered to employees of non profit organizations 

ITA  tax deferred retireent plan usually opened by individual

traditional, roth, SEP, simple

pay income tax when you take the money out of retirement

use this if you expect to be in a lower tax bracket when you retire 

pay income taxes when invested and not during retirement 

best if expect to be in same or higher tax bracket 

type of traditional IRA for self employed or small business 

• business can invest money fo the employee 
• tax free until the money is taken out at retirement
• up to 25% of income may be contributed 

• for small businesses and self employed
• employees are allowed to contribute and employers
• hae higher contribution limits

savings certificate entitling bearer to receive interest

has maturity and specified fixed interest rate (1mo-5 years)

investment vehicle that is made of a pool of funds (stocks, bonds, money markets)

operated by money managers who invest the funds capital and attempt to produce income for the investor

• debut investment 
• investor loans money to entity that borrows funds for defined period 
• fixed interest rate
• used by companies to finance projects

shareholders buy ownership in a corporation (return depends on market)

common stock: owner voting rights and eligible to receive dividents

Preferred stock: no voting rights and guranteed regular divident paymetns

financial product sold by financial institutions

contract between you and financial institution designed to meet long range goals (retirement)

degree of potential loss an investor can accept 

how much you are willing to loose

younger investors can tolerate more risk 

dollar cost averaging: boying a fixed dollar amount of a certian investment on a regular basis regardless of share price 

portfolio diversification: wide variety of investments