Apparent Authority

Apparent authority is the appearance of power on behalf of the insurer through the actions or use of identifying materials by the agent (producer), such as company advertising material. This type of authority occurs when a principal permits an agent to act on its behalf without either expressed or implied authority.


A statement of information made by a person applying for life insurance. It helps the life insurance company assess the acceptability of risk. Statements made on the application are used to decide on an applicant’s underwriting classification and premium rates.


The authorization for an agent (producer) to act for or represent an insurance company. An agent must have a minimum of one appointment but may have as many as they wish.


Appreciation is the increase in the value of an asset.  Appreciation is a common investment objective. Appreciation is also called growth. Realized appreciation is taxable. Unrealized appreciation is subject to market risk and is not taxable.


Arbitrage is dealing in differences. Arbitrage is legal.

Ask Price

The ask price is the price at which the dealer is willing to sell the stock to an investor or another dealer. The ask price of an open-end mutual fund share is what the client will pay to purchase the share.


An asset is something that is owned by either an individual or a business. Assets are found on the balance sheet. Assets include current assets, fixed assets, and intangible assets.

Asset Allocation Fund

In an asset allocation fund the portfolio is invested a specific percentage in each of the various asset classes.

Asset Class Allocation

Asset class allocation involves determining certain percentages of asset classes to be held in a portfolio. Asset classes include stocks, bonds, real estate, cash, and precious metals.


The transfer of all or part of a policy owner´s legal title and rights to a policy to another person. It is possible to change this type of transfer at a later date.

Assumed Interest Rate (AIR)

The assumed interest rate is a base rate used for illustrating payments from a variable annuity, the assumed interest rate is not a guarantee. Assumed interest rates vary by insurance company. Naturally, the higher the assumption, the higher the initial benefit, and vice versa. When the actual return is equal to the AIR, the monthly payment will remain the same as the prior month.

Attained Age

The insured’s current age is their attained age.

Auction Market

In an auction stock exchange the securities are sold to the highest bidder.  It is a two-way auction since some brokers are bidding to sell at the highest possible price while others are bidding to buy at the lowest possible price.  The NYSE was historically an auction market. Today, the NYSE is a hybrid market, with some trades taking place electronically and some trades at auction.

Auction Rate Securities

Auction rate securities were sold as either a type of debt security or preferred stock. If the ARS was a debt security it was sold as either a corporate or municipal bond. ARS had an interest rate or dividend that were periodically re-set through auctions, typically every 7, 14, 28, or 35 days. When the ARS is tax-exempt the interest rates were reset approximately monthly. In 2007, interest-rate auctions for ARS began to fail when the auctions attracted too few bidders to establish a clearing rate. In 2008, the ARS market collapsed when lead underwriters chose not to step in to support the auctions. Investors were left holding illiquid investments with long-term maturities.

Audited Financials

Audited financials are financial statements that have been verified by an independent certified public accountant (CPA). Audited financials include a company’s annual report (10-K filing with the SEC).

Authorized Insurer

An authorized insurer can legally do business in this state.

Authorized Stock

Authorized stock is the maximum number of shares a corporation may issue under the terms of its charter. The number of shares authorized may be changed, with the approval of the stockholders.

Automatic Premium Loan

Automatic premium loan is a free rider that the owner of a whole life policy can select that will keep a policy in force if the premium for the policy is not paid. This rider is not available on term insurance since there is no cash value.

Aviation Exclusion

This exclusion may be part of the policy’s language or added by a rider, it takes away coverage when the insured is “other than a fare-paying passenger.”


Avoidance is a risk management tactic whereby the risk of loss is prevented in its entirety by not engaging in activities that present the risk.

Back-end Load

Back-end loads are most commonly found on class B mutual fund shares. Also called a contingent deferred sales charges. If an investor redeems their shares before the period of time described in the prospectus has expired, they will have a sales charge charged on their redemption amount.

Balance of Payments

The balance of payments is a country’s record of its transactions with the rest of the world over a period of time.

Balance of Trade

A country’s balance of trade is its exports versus its imports. A county that imports more than it exports has a balance of trade deficit. A country that exports more than it imports has a balance of trade surplus.

Balance Sheet

The balance sheet is a financial statement that shows the financial health of a company or an individual at a moment in time. The balance sheet includes what is owned and what is owed.

Balance Sheet Equation

The balance sheet equation is assets = liabilities plus shareholders’ equity. For a client, assets minus liabilities = net worth.

Balanced Fund

A balanced mutual fund is a type of mutual fund whose stated investment policy is to have at all times some portion of its investment assets in bonds and stocks, creating a balance between the two types of securities.

Banker’s Acceptance

Banker’s acceptances are letters of credit from a bank guaranteeing payment of a debt. Generally, bankers’ acceptances are used in the import and export business.  They are short-term, money market instruments.


A bond’s yield to maturity is sometimes referred to as its basis yield. Basis can also be used to reference an investment’s after-tax dollars (cost basis).

Basis Point

A basis point is 1/100th of yield, ten cents.

Bear Market

A bear market is one in which the prices of securities are falling or are expected to fall.

Benchmark Portfolio

A benchmark portfolio is an index that is used for comparison purposes when judging a portfolio manager’s performance.


The person named in the policy to receive the insurance proceeds at the death of the insured. Anyone can be named as a beneficiary.

Best-efforts Underwriting

In a best-efforts underwriting the underwriter is acting as an agent for the issuer, the underwriter puts forth his or her best efforts to sell as many shares as possible. The issuer pays the underwriter a commission for those shares sold. The underwriter does not have liability for unsold shares, as in the case of a firm-commitment agreement.


Beta measures a stock or portfolio’s volatility as compared to the market as a whole. A beta of 1 means the security or portfolio moves with the market. The market in this case is the S&P 500. A beta of greater than 1 is aggressive, and less than 1 but greater than 0 is defensive. A negative beta would mean the performance is the opposite of the market.

Bid Price

The bid price is the price at which a dealer is willing to buy stock from an individual or another dealer. The client sells at the bid. On an open-end mutual fund share, the client redeems at the bid. The bid price of an open-end mutual fund is also called the redemption price, or net asset value per share.


The Black-Scholes is a pricing model for options.

Blend/Core Fund

A blend/core fund is an equity fund that has different classes of stock within its portfolio. The prospectus of the fund would fully describe the investments found in this type of fund’s portfolio, as well as the management strategies used. A blend/core fund is actively managed.

Block Trade

A block of stock is 10,000 shares or a value of $200,000 or more.


Blockchain is an electronic distributed ledger or list of entries that is maintained by various participants in a network of computers. Blockchains use cryptography to process and verify transactions on the ledger, providing comfort to users and potential users of the blockchain that entries are secure.

Blue Chip Stock

Blue chips are stocks of strong, well-established companies that have demonstrated their ability to pay dividends in good times and bad times. Blue chip stocks include General Motors, Johnson & Johnson, JPMorgan Chase, and 3M Company, to name a few.

Blue Sky Laws

Blue Sky laws are state securities laws, the Uniform Securities Act.

Board of Directors

A board of directors consists of individuals elected by shareholders to establish corporate management policies. The board of directors will determine dividend distributions, among other duties.

Bona Fide

Bona fide means genuine, authentic, and real.


Bonds represent the borrowing of money by a corporation or government.   The bond is a legal obligation of the company or government to repay the principal at the maturity of the bond.  Terms of the repayment and any interest to be paid are stated in the indenture. Bonds are issued with a par value ($1,000), representing the amount of money borrowed by the company. The issuer promises to pay a percentage of the par value as interest on the borrowed funds. The interest rate is stated on the face of the bond at issue and is called the nominal or coupon rate and is fixed.

Bond Fund

A bond fund is a type of mutual fund whose investment policy is to provide stable income with a minimum of capital risks. Bond funds may invest in corporate, government, or municipal bonds.

Bond Rating

A bond rating is a measurement of the quality of a bond issue as determined by independent bond rating services. AAA is of the highest quality. Both Moody’s Investor’s Service and Standard & Poor’s Corporation have such services.

Bonus Rate Annuity

An extra percent of interest credited to an annuity during the first year that it is in force. The extra amount is above the interest rate to be credited beginning the second year and the remaining years that the annuity is in force. The extra rate is paid in the first year to attract new policyholders.

Book Entry Security

Book entry securities do not have paper certificates. Most securities today are book entry, with the ownership recorded electronically.

Book Value Per Share

Book value per share is the net worth of the company minus intangible assets and preferred stock divided by the number of shares of common stock outstanding in the hands of the public. Value stocks have a low price/book ratio. Value stocks’ market price trades at a low multiple of its book value per share.


A boycott is a concerted refusal to deal or a group action designed to pressure another party into doing something by withholding or enlisting others to withhold patronage or services from the target. It can be a method of shutting a competitor out of a market or preventing entry of a new firm into a market. Boycott is an unfair method of competition that is prohibited under state law.

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