Par value

The face amount of a bond.  It is equivalent to the principal on a loan.  The issuer gets the par value when it issues the bond and re-pays the par value when the bond matures.

Passively managed fund

An investment fund whose securities are determined so that the performance of the fund tracks a certain basket of assets.

Percentile

The value below which a stated percent of observations fall.  For example, 25% of the observations fall below the value corresponding to the 25thpercentile.

Personal Injury Protection

Insurance coverage that pays benefits to you and members of your immediate family when involved in an auto accident, regardless of who is at fault.  

Physical damage coverage

An insurance coverage that protects you when you cause damage to your own property, such as in a car accident, or without human cause, such as fire, hail, storm or earthquake.

Preferred Provider Organization

(PPO) A form of healthcare network that allows you to see any provider at any time, but usually with higher reimbursement rates by the insurer if you go to a provider in their network than one out of their network.

Preferred Stock

An ownership share in a company that does not provide the owner voting rights. Preferred stock has higher priority than common stock owners in the event of bankruptcy. That is, if there is money left over after all creditors have been fully repaid, preferred shareholders are paid before common shareholders.

Present value

The value today of a stated amount of money you receive in the future.  It is calculated by dividing the stated amount of money by 1 + the interest rate adjusted for the length of time, t, between the date the calculation is done and the date the payment will be received.  This adjustment is accomplished by raising (1+i) the tth power.  Specifically, the present value at an interest rate of I of $X received in t years is:

Principal

The amount of money you borrowed or deposited, excluding any accumulated interest. Some examples include:

  • Credit cards: The amount of purchases you have made but not paid on your credit card bill.
  • Car loans: The portion of the amount you paid for your car that you have not paid off.
  • Mortgages: The portion of the amount you paid for your house that you have not paid off.
  • Savings account: The balance in the account.