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paper gain (loss)

Unrealized capital gain (loss) on securities held in portfolio, based on a comparison of current market price to original cost.

par bond

A bond selling at par.

payroll deduction

Payments made on your behalf by your employer. They are automatically deducted from your pay check.

points

Points are charges added to a mortgage loan by the lender and are based on the loan amount. One point is equal to 1% of the original loan balance.

policy

A contractual arrangement between the insurer and the insured describing the terms and conditions of the life insurance contract.

policy loan

The policy owner can borrow from the cash value component of many permanent insurance policies for virtually any purpose. Any policy loans that are outstanding at the time of death of the insured will be deducted from the benefit paid to the beneficiary.

political risk

Political risk is the risk that stock prices may decline dramatically during periods of political unrest or crisis.

power of attorney

A legal document authorizing one person to act on behalf of another.

premium

The payment that the owner of a life insurance policy makes to the insurer. In exchange for the premium payment, the insurer assumes the financial risk (as defined by the insurance policy) associated with the death of the insured.

present value

The current worth of a future payment, or stream of payments, discounted at a given interest rate over a given period of time.

principal

The principal amount of a loan or mortgage is the outstanding balance, excluding interest.

private mortgage insurance

Private mortgage insurance protects the lender against the default of higher risk loans. Most lenders require private mortgage insurance on loans where the loan-to-value ratio is higher than 80% (less than 20% equity).

probate

The process used to make an orderly distribution and transfer of property from the deceased to a group of beneficiaries. The probate process is characterized by court supervision of property transfer, filing of claims against the estate by creditors and publication of a last will and testament.

profit sharing plan

A Profit-Sharing Plan is the most flexible and simplest of the defined contribution plans. It permits discretionary annual contributions that are generally allocated on the basis of compensation. The employer will determine the amount to be contributed each year depending on the cash-flow of the company. The deduction for contributions to a Profit-Sharing Plan cannot be more than 15% of the compensation paid to the employees participating in the plan. Annual employer contributions to the account of a participant cannot exceed the smaller of $30,000 or 25 percent of a participant's compensation.

prohibited ira transactions

Generally, a prohibited transaction is any improper (self-dealing) use of the IRA by the account owner. Some examples include borrowing money from an IRA, using an IRA to secure a loan and selling property to an IRA.

prospectus

A detailed statement prepared by an issuer and filed with the SEC prior to the sale of a new issue. The prospectus gives detailed information on the issue and on the issuer's condition and prospects.