General Financial Terms

General Financial Instruments and Entities

• Bank: Financial institution offering various services like accounts and loans.
• ATM: Automated teller machine for bank transactions without employee help.
• Credit Union: Non-profit financial cooperatives offering services often at lower costs.
• Mutual Fund: Funds pooled from many investors to buy a diversified portfolio of stocks or bonds.

Types of Accounts and Financial Tools

• Checking Account: Depository account for everyday transactions.
• Savings Account: Interest-bearing account meant for saving money.
• Certificate of Deposit (CD): Savings certificate with a fixed maturity date and fixed interest rate.
• Money Market Account: Account that offers higher interest rates and limited transaction capabilities.

Credit and Loans

• Credit: Method of borrowing money to purchase goods or services.
• Credit Card: Card that allows the holder to borrow funds for purchases.
• Debit Card: Card that allows transactions directly from one's bank account.
• Mortgage: Loan specifically for purchasing real estate.

Investment and Returns

• Stocks: Shares of ownership in a company.
• Bond: Debt security, typically issued by a corporation or government.
• Capital Gains: Profit from the sale of assets like stocks or real estate.
• Dividend: Payment made by a corporation to its shareholders.

Financial Planning and Management

• Budget: Plan for managing income, expenses, and savings.
• Net Worth: Total assets minus total liabilities.
• Liquidity: Ease of converting assets into cash.
• Inflation Risk: Risk that inflation will diminish the purchasing power of money.

Costs and Charges

• Interest: Cost of borrowing money or the earnings from lending money.
• Finance Charges: Interest and fees charged on unpaid credit balances.
• Annual Percentage Rate (APR): Annual rate charged for borrowing or earned through an investment.

Financial Security and Risks

• Insurance: Financial protection against specific risks, leading to compensation in the case of loss.
• Risk: Possibility of losing financial investment or facing financial instability.
• Credit Report: Record that tracks a borrower's credit history and reliability.

### Example of Calculating Total Return from an Investment