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GLOSSARY
Cash method
Cash method is a type of accounting that tracks income as it's received, and expenses as they're paid. This differs from accrual accounting, which matches income and expenses in the period when the transaction occurs, rather than when the payment is received.
Cash reserves
A cash amount which is determined by the lender which is often required to be held in reserve. This is in addition to the down payment and closing costs. These may be in the form of deposits, money market accounts, or bonds.
Cash surrender value
Cash surrender value is the amount of money a life insurance policyholder will receive if he or she voluntarily cancels the policy.
Cash-on-cash return
Cash-on-cash return is a measurement of annual yield most commonly used with respect to investment properties. The calculation is the property's annual cash rental income divided by the total cash investment (or down payment).
Cash-out refinance
This term is used when a borrower refinances his mortgage to obtain a new loan far exceeding the amount of his current loan amount with the intention of using it for personal or other reasons.
Cash-out refinancing
Cash-out refinancing is the replacement of an old mortgage with a new and larger one. The amount of the new mortgage left over after paying off the old mortgage goes to the borrower as a lump sum cash payment.
Cashier's check
A cashier's check is a draft written by a bank and signed by a bank cashier or officer. Cashier's checks do not bounce, as a personal check might, because the instrument is drawn on the bank, and not on a personal account.
Cashless exercise
Cashless exercise is a means of exercising an employee stock option without producing any cash. The optionholder borrows money from a broker to exercise the option, and then directs the broker to simultaneously sell enough shares to repay the borrowed funds.
Caveat emptor
Latin for "the buyer needs to beware." It means that the buyer of a property or item buys or invests at his or her own risk.
CD (certificate of deposit) ladder
A CD (certificate of deposit) ladder is a portfolio of CDs that mature at regular intervals. An investor would develop a CD ladder to access higher time deposit rates while minimizing the risk of not being able to access cash if necessary.
CD line of credit
A CD line of credit is a debt facility that's secured by a certificate of deposit. If the debtor doesn't repay the line of credit as agreed, the lender can take the money invested in the CD.
Ceiling
The maximum allowable interest rate of an adjustable rate mortgage.
Central bank
A central bank is responsible for setting and implementing a political entity's monetary policy. An example is the Federal Reserve Bank in the United States. The Federal Reserve Bank oversees the monetary policy, issues money, and regulates the banking system, among other things.
Certainty equivalent
Certainty equivalent is the rate of guaranteed return an investor would trade for a higher, but less certain, return. The certainty equivalent, which is lower than the riskier rate of return, helps corporate debt issuers determine what level of interest their bonds would have to pay to entice investors.
Certificate of claim
A certificate of claim is a borrower's promise to reimburse a lender if a foreclosure sale of the collateral doesn't produce enough money to pay back the loan balance and other amounts outstanding in full.