Glossary and Acronyms "B"

Balance Sheet

A dated financial statement (in table form) that shows your assets, liabilities and net worth.

Balloon Mortgage

A loan that provides you with lower-than-usual monthly payments for a set period of time followed by a payment larger than usual at the end of your loan repayment period. While a balloon loan may lower your monthly payments it can also mean you make higher interest payments over the life of the loan.

Baloon Payment

A Mortgage requiring periodic payments for a specified time and a lump-sum payment of the outstanding balance at maturity is a Baloon Payment.

Base rate

An interest rate that is used as a benchmark, or index, for pricing variable-rate loans such as adjustable-rate mortgages, auto loans and credit cards.

Bankruptcy

A statutory procedure by which a usually insolvent debtor obtains financial relief and undergoes a judicially supervised reorganization or liquidation of the debtor's assets for the benefit of creditors. e.g Chapter 7 Bankruptcy, Chapter 13 Bankruptcy

Bond

An interest-bearing certificate of debt with a maturity date. A real estate bond is a written obligation that is usually secured by a mortgage or a deed of trust.

Bona fide

Made in good faith without fraud or deceit.

Break even point

The point at which total income equals total expenses. Also used in connection with decisions related to purchasing discount points on a mortgage. Calculating the break even point will identify how many months it will take to recoup the costs associated with paying for the discount point amount under consideration. In other words, if $4,800 is paid toward discount points to reduce the interest rate and the reduced rate would decrease the monthly mortgage payment by $100, it would take 4 years to break even on the choice to pay the discount point amount.

Bridge loan

A type of mortgage financing between the termination of one loan and the start of another loan. For example, a bridge loan might be taken out by a borrower and secured by that borrower’s present home so that the closing on a new house can take place before the present home is sold.

Broker

A third party who arranges funding or negotiates a contract between parties, but does not lend the money.

Broker fees

Fees charged by a real estate broker or a mortgage broker for providing assistance in a real estate transaction.

Buy down

The lump-sum prepayment of all or a portion of your mortgage interest by a lender or home builder in order to lower your monthly mortgage payment, typically for a period of 1-3 years is a buydown, and also referred to as Mortgage Points.

Building Code

A law or regulation setting forth standards for construction, maintenance, occupancy, use, or appearance of buildings and dwelling units.

Buy-Down Account

The account in which funds are held so they can be applied as each payment comes due for an interest rate buy-down plan.

Back-end load

A fee imposed by some funds when shares are redeemed (sold back to the fund) during the first few years of ownership. This is also referred to as a contingent deferred sales charge.

Balanced fund

A fund with an investment objective of both long-term growth and income, through investment in both stocks and bonds.

Barclay’s Global Aggregate Sovereign Bond Index

An unmanaged index that is the sovereign component of the Barclays Global Aggregate Bond Index; comprises bonds of investment-grade, BB+, BB and unrated global sovereign issues with maturities ranging from one to 98 years.

Barclay’s U.S. Corporate High Yield 2% Issuer Capped Index

An unmanaged index that reflects the performance of fixed-rate, non-investment-grade, U.S. dollar-denominated taxable corporate bonds. The maximum exposure to any one issuer is limited to 2%, and the holdings must have at least one year to maturity, have a minimum of $150 million par value outstanding and be publicly issued with a maximum credit rating of Ba1; gives a broad look at how high-yield (“junk”) bonds have performed.

Barclays 7-Year Municipal Bond Index

An unmanaged index that consists of a broad selection of investment-grade general obligation and revenue bonds with maturities of approximately seven years.

Barclays Global Aggregate Bond Index

An unmanaged index of fixed-rate, publicly issued, taxable bond market issues with a remaining maturity of at least one year; a broad-based measurement of the performance of the global investment-grade fixed-income markets.

Barclays Global Aggregate Corporate Bond Index

An unmanaged index that is the corporate component of the Barclays Global Aggregate Bond Index; comprises bonds of investment-grade, high-yield, and unrated corporate issues from North America, Europe, Australia and Asia-Pacific regions with maturities ranging from one to 100 years.

Barclays Municipal Bond Index

An unmanaged, market value-weighted index of investment-grade municipal bonds with a minimum credit rating of BAA and maturities of one year or more; serves as a broad market performance index for the tax-exempt bond market.

Barclays U.S. 1-3 Year Government/Credit Bond Index

An unmanaged index of U.S. dollar-denominated, investment-grade, fixed-rate, publicly issued, taxable bond market issues (including Treasury, government and corporate securities) with a remaining maturity of one to three years.

Barclays U.S. Aggregate Bond Index

An unmanaged market value-weighted index of investment grade, fixed-rate debt issues (including government, corporate, asset-backed and mortgage-backed securities with maturities of one year or more) that is generally representative of the bond market as a whole.

Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index

An unmanaged, market capitalization-weighted index that measures the performance of all U.S. dollar-denominated, fixed-rate, nonconvertible, investment-grade, publicly-issued U.S. TIPS with $250 million or more in outstanding face value and a remaining maturity of at least one year.

Basis point

One-hundredth of one percent, or 0.01%. For example, 20 basis points equals 0.20%. Investment expenses, interest rates, and yield differences among bonds are often expressed in basis points.

Benchmark

An unmanaged group of securities whose performance is used as a standard to measure investment performance. Some well-known benchmarks are the Dow Jones Industrial Average and the S&P 500 Index.

Beta

A measure of a fund's sensitivity to market movements. The beta of the market is 1.00 by definition. Morningstar calculates beta by comparing a fund's excess return over Treasury bills to the market's excess return over Treasury bills. A beta of 1.10 shows that the fund has performed 10% better than its benchmark index in up markets and 10% worse in down markets, assuming all other factors remain constant. Conversely, whereas a beta of 0.85 indicates that the fund's excess return is expected to perform 15% worse than the market's excess return during up markets and 15% better during down markets. Alpha, beta and R-squared are considered MPT (Modern Portfolio Theory) statistics and are based on a least-squared regression of the fund’s return over Treasury bills (called excess return) and the excess returns of the fund’s benchmark index.

Blanket Mortgage

A Mortgage that covers an aggregation of property, or that secures indebtedness previously existing in various forms. For example, a mortgage covering two or more properties that are pledged to support a debt

Bloomberg Roll Select Commodity Total Return Index

A version of the Bloomberg Commodity Index that aims to mitigate the effects of contango market structure on index performance. For each commodity, the index rolls into the futures contract showing the most backwardation or the least amount of contango, selecting from those eligible contracts with nine months or fewer until expiration.

BofA Merrill Lynch (BofAML) 1-Year T-Bill Index

An unmanaged index that measures the returns of 12-month Treasury bills. Consists of a single issue purchased at the beginning of a month and held for the full month. At the end of that month, that issue is sold and rolled into a newly-selected issue. The issue selected at each month-end rebalancing is the outstanding T-bill with the longest maturity.

BofA Merrill Lynch (BofAML) 6-Month Treasury Bill (T-Bill) Index

An unmanaged index that measures the returns of six-month Treasury bills. Consists of a single issue purchased at the beginning of a month and held for the full month. At the end of that month, that issue is sold and rolled into a newly selected issue. The issue selected at each month-end rebalancing is the outstanding T-bill that matures closest to, but not beyond, six months from the rebalancing date.

BofA Merrill Lynch (BofAML) AAA U.S. Treasury/Agency Master Index

An unmanaged index that gives a broad look at how U.S. government bonds with a remaining maturity of at least one year have performed.

BofA Merrill Lynch (BofAML) Current 5-year U.S. Treasury Index

An unmanaged, one-security index, rebalanced monthly, that measures the performance of the most recently issued 5-year U.S. Treasury note; a qualifying note is one auctioned on or before the third business day prior to the final business day of the month.

BofA Merrill Lynch (BofAML) Global High Yield Index

An unmanaged, market capitalization-weighted index that gives a broad-based measurement of global high-yield fixed-income markets; measures the performance of below-investment-grade, corporate debt with a minimum of 18 months remaining to final maturity at issuance that is publicly issued in major domestic or eurobond markets, and is denominated in U.S. dollars, Canadian dollars, British pounds and euros.

BofA Merrill Lynch (BofAML) U.S. High Yield Cash Pay Constrained Index

An unmanaged, market-weighted index that measures the performance of publicly issued, nonconvertible, fixed-rate, coupon-bearing, U.S. dollar-denominated, below-investment-grade corporate debt with a maturity of at least one year. Each issue represented must have an outstanding par value of at least $50 million, must be less than BBB/BAA3-rated but not in default, and is restricted to a maximum of 2% of the total index.

Bond

A debt security that represents money borrowed by a corporation, government, or other entity. The borrower repays the amount of the loan, plus a percentage as interest. Income funds generally invest in bonds.

Bond fund

A fund that invests primarily in bonds and other debt instruments.

Bond rating

A rating or grade that’s intended to indicate the credit quality of a bond. The financial strength of its issuer and the likelihood that it will repay the debt are considered. Agencies such as Standard & Poor’s, Moody’s Investors Service and Fitch issue ratings for different bonds, ranging from AAA (highly unlikely to default) to D (in default).

Borrower

Someone who mortgages property.

Broker

A person who acts as an intermediary between the buyer and seller of a security, insurance product or mutual fund. This person is often paid a commission. The terms broker, broker/dealer and dealer are sometimes used interchangeably.

Brokerage window

An optional service lets you establish a self-directed brokerage account. This option carries distinct charges.

Buyer's Broker/Agent

A Real Estate Broker who acts as the agent of a purchaser of property. Statutes in many states permit prospective buyers to retain a licensed real estate agent. In some states, a buyer's broker is treated as the sub-agent of the broker with whom the owner lists property for sale and not the agent of the buyer.

Buyer's Market

A market in which supply significantly exceeds demand, resulting in lower prices.