Nominal cost

The amount you pay for something stated in terms of the its cost in the year you make the purchase.  For example, if you assume that the only reason the cost of something changes is inflation, the nominal cost will increase in direct proportion to the inflation rate.  Stated differently, the nominal cost is equal to the real cost after adding in the impact of inflation.

Normal yield curve

A yield curve on which the interest rate increases consistently as the maturity date gets further away.

Open-end fund

A fund that can sell or buy shares from investors at any time. The market price of an open-end fund is equal to its net asset value.

P/B Ratio

The ratio of a company’s stock price (P) to its book value (B) per share. Book value is the same as shareholders’ equity on the company’s financial statements.

P/E Ratio

The ratio of a company’s stock price (P) to its earnings per share (E). Earnings per share is approximately equal to the company’s net income divided by the number of shares it has outstanding.

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.


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.