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GLOSSARY
Risk tolerance
Risk tolerance is an investor's capacity to accept declines in the value of her investment portfolio. An investor with a low risk tolerance accepts lower returns for the security of knowing that the portfolio won't suffer drastic decreases in value. An investor with a high risk tolerance is willing to take more chances in the hopes of a higher return.
Risk-based mortgage pricing
Risk-based mortgage pricing is the practice of offering lower-rate mortgage loans to more creditworthy borrowers, and higher-rate mortgage loans to less creditworthy borrowers.
Roll in
When you include certain closing costs, such as origination and settlement fees into the mortgage. This results in lower closing costs and higher monthly payments.
Roll in loans
A refinancing loan that rolls any closing costs or fees into the loan.
Roll over
Roll over is a type of loan that gives the borrower the option of renewing the debt at the maturity date.
Rollover
Roll over is a type of loan that gives the borrower the option of renewing the debt at the maturity date.
Rollover mortgage
Rollover mortgage is an intermediate-term debt secured by real estate. The rollover mortgage has a fixed rate, but the loan expires in three to five years without fully amortizing. At maturity, the mortgage is renewed at the then-current interest rate.
Roth 401(k)
Roth 401(k) is an employer-sponsored retirement savings plan that combines elements of a traditional 401(k) and a Roth IRA. As with the Roth IRA, contributions are made with after-tax money, but withdrawals and investment gains are tax-free. Notably, the Roth 401(k) has no income limitations, so anyone can contribute up to the specified limit, regardless of income.
Roth conversion
Roth conversion is the process of transferring assets from a Traditional, SEP, or SIMPLE IRA into a Roth IRA. There may be tax consequences associated with a Roth conversion.
Roth IRA
A Roth IRA is a type of tax-advantaged retirement savings account available in the U.S. Contributions to a Roth IRA are made with after-tax money, but earnings and qualified withdrawals are tax-free. Qualified withdrawals can't be made until the account has been open for five years and the accountholder reaches aged 59 1/2. Roth IRAs are subject to annual contribution limits and income limitations.
Routing Transit Number - RTN
Routing transit number, or RTN, is a nine-digit identification code used by U.S. banks. The RTN is printed on checks and facilitates clearing and processing.
Royalty income
Royalty income is fees paid for the right to use another's property, right, or artistic creation. Royalty income is usually paid as a percentage of sales. A product inventor, for example, might contract with a manufacturer to receive 2 percent of the sales revenue every time the manufacturer sells one of the inventor's products.
Rule of 72
Rule of 72 is a means of estimating how many years it will take to double an investment that's earning a certain interest rate. To make the calculation, divide the compound interest rate by 72. A 10 percent interest rate, for example, will double an investment in 7.2 years.
Rule of 78
Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11.
Rule of 78s
Rule of 78 is a means of calculating an interest rebate on a prepaid installment loan where the interest is added to the loan balance upfront. The number 78 comes from the sum of 1 through 12, for the months of the year. If the borrower pays the loan after one month, the borrower will be charged 12/78 of the interest and refunded the rest. If prepayment occurs after two months, the charge will be 23/78, with the 23 representing 12 plus 11.