D363: Terms to Know Test Study
Guide
APR (Annual Percentage Rate) - Answer The annual rate that is charged for borrowing (or
made by investing), expressed as a single percentage number that represents the actual yearly
cost of funds over the term of a loan. This includes any fees or additional costs associated with
the transaction.
Asset Allocation - Answer form of diversification in which the investor decides on the
proportions of an investment portfolio that will be devoted to various categories of assets
beneficiary - Answer Person who receives life insurance proceeds, per policy
Bond Rating - Answer An impartial outsiders opinion of the quality of or creditworthiness of
the issuing organization
Coinsurance - Answer method by which the insured and the insurer share proportionately in
the payment for a loss
Deductible - Answer an initial portion of any loss that must be paid before collecting
insurance benefits
Defined Benefit retirement plan - Answer employer-sponsored retirement plan that pays
lifetime monthly annuity payments to retirees based on a predetermined formula
defined contribution plan - Answer A retirement plan in which a certain amount or
percentage of money is set aside each year by a company for the benefit of each of its
employees
Diversification - Answer The process of reducing risk by spreading investment money among
several different investment opportunities
Dollar Cost Averaging (DCA) - Answer Systematic program of investing equal sums of money
at regular intervals, regardless of the price of the investment
Depository Institutions - Answer Financial institutions in the US that are legally allowed to
offer checking and savings accounts to individuals and businesses as well as provide loans
Guide
APR (Annual Percentage Rate) - Answer The annual rate that is charged for borrowing (or
made by investing), expressed as a single percentage number that represents the actual yearly
cost of funds over the term of a loan. This includes any fees or additional costs associated with
the transaction.
Asset Allocation - Answer form of diversification in which the investor decides on the
proportions of an investment portfolio that will be devoted to various categories of assets
beneficiary - Answer Person who receives life insurance proceeds, per policy
Bond Rating - Answer An impartial outsiders opinion of the quality of or creditworthiness of
the issuing organization
Coinsurance - Answer method by which the insured and the insurer share proportionately in
the payment for a loss
Deductible - Answer an initial portion of any loss that must be paid before collecting
insurance benefits
Defined Benefit retirement plan - Answer employer-sponsored retirement plan that pays
lifetime monthly annuity payments to retirees based on a predetermined formula
defined contribution plan - Answer A retirement plan in which a certain amount or
percentage of money is set aside each year by a company for the benefit of each of its
employees
Diversification - Answer The process of reducing risk by spreading investment money among
several different investment opportunities
Dollar Cost Averaging (DCA) - Answer Systematic program of investing equal sums of money
at regular intervals, regardless of the price of the investment
Depository Institutions - Answer Financial institutions in the US that are legally allowed to
offer checking and savings accounts to individuals and businesses as well as provide loans
