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A balance sheet is a financial statement that is divided into three major parts: assets, liabilities and shareholders' equity.

Balloon mortgage

The terms on a balloon mortgage are insufficient to completely amortize the loan. A balloon, or lump sum, payment is required at the maturity of the loan to completely pay off the remaining principal. Balloon mortgages often contain a contractual opportunity to refinance when the balloon payment is due at prevailing rates.

Bank reserves

The amounts that banks are required to keep on deposit at a Federal Reserve Bank, as determined by reserve ratios. Funds in excess of these reserves are loaned out or invested by the banks.

Bankruptcy

A federal court proceeding in which a debtor who is unable to continue to meet his/her financial obligations may be relieved from the payment of certain debts. This action seriously affects the borrower's credit worthiness.

Basis

An amount usually representing the actual cost of an investment to the buyer. The basis amount of an investment is important in calculating capital gains and losses, depreciation, and other income tax calculations.

Basis points

Basis Points is a term used by investment professionals to describe yields of bonds. One basis point equals one 100th of 1%, or .01%. A bond yield increase from 10.0% to 10.1% represents an increase of 10 basis points.

Bear market

A prolonged decline in overall stock prices occurring over a period of months or even years.

Beneficiary

The person who is designated to receive the benefits of a contract.

Beta

A statistically generated number that is used to measure the volatility of a security or mutual fund in comparison to the market as a whole.

Bid price

The price that a buyer is willing to pay for a security or commodity.

Blue-chip stocks

The equity issues of financially stable, well-established companies that usually have a history of being able to pay dividends in bear and bull markets.

Bond

A certificate of indebtedness issued by a government entity or a corporation, which pays a fixed cash coupon at regular intervals. The coupon payment is normally a fixed percentage of the initial investment. The face value of the bond is repaid to the investor upon maturity.

Bonding requirement

The individual(s) that are appointed to run the day-to-day operations of a qualified plan, as well as the trustee(s) and investment managers must be bonded. The bond is required to provide protection to the plan against loss due to fraud, theft, forgery or dishonesty.

Book value

The value that belongs to a company's owners or shareholders after total liabilities have been subtracted from total assets. Also called shareholders equity.

Bull market

A prolonged increase in overall stock prices—usually occurring over a period of months or even years.

Buy-down

A buy-down refers to the payment of additional discount points in return for a below market interest rate (and therefore a lower monthly payment) on a home mortgage.

Buy-sell agreement

An agreement between shareholders or business partners to purchase each others' shares in specified circumstances.