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GLOSSARY
Bargain element
The bargain element is the implied gain that an investor earns when exercising a stock option, i.e., the difference between the fair market value of a stock on the day the option is exercised, and the strike price, multiplied by the number of shares. For tax purposes, the bargain element is treated as income and not as a capital gain.
Bargain sale
The transferring or purchasing of property or an item for less than market value.
Base interest rate
The base interest rate is the lowest rate an investor will tolerate for a non-Treasury security. Because Treasury securities are considered no-risk investments, the base interest rate would be greater than the rate offered by Treasury securities of the same maturity.
Base loan amount
The initial loan amount upon which loan payments are based. Other charges, such as interest may be added to the initial amount during the lifetime of the loan.
Base price
The base price is the sales value of a vehicle that has no options. Base price includes the car's standard equipment and warranty, but doesn't include the cost of any upgrades, or optional dealer services. Auto dealerships list a vehicle's base price on the window sticker.
Base rate
The base rate is the percentage of fees banks charge their most qualified borrowers. The term is typically used in the U.K., and is similar in definition to the prime rate in the U.S.
Basis
Basis is the purchase price of an investment, minus commissions and purchases expenses. The basis is an important component in the calculation of capital gains or losses for tax purposes. In reference to IRAs, the basis is the balance within an IRA representing nondeductible contributions. Basis can also mean the difference between a commodity's cash price and its shortest duration futures price.
Basis point
A basis point is 1/100th of 1 percent. The basis point is often used in reference to interest rates. If the Fed decreases the prime rate from 7.50 percent to 7.25 percent, the rate is said to have gone down 25 basis points.
Bearer bond
A bearer bond is a debt investment that doesn't have a registered owner, but is considered the property of whoever has it in his or her possession. The bond may have attached coupons that must be submitted to the bond issuer in return for interest payments.
Bearing wall
A bearing wall supports the weight of a structure. In a one-story home, for example, the bearing walls primarily support the roof. Bearing walls can't be removed without affecting the structure's stability.
Bedroom community
A suburban community in which the residents commute to the city to work. These communities do not support their own employment centers for its residents so the people are said to only sleep there after commuting to a larger city to work the majority of the time. Often, people chose to live in one of theses communities because of affordability, good schools, and low crime rates.
Before-tax income
Before-tax income is the gross earnings of an individual or company prior to the deduction of taxes.
Beneficiary
A beneficiary is any individual or legal entity that's named as an inheritor of funds or property in a bank account, trust fund, insurance policy, will, or similar financial contract.
Benefit offset
Benefit offset is a withholding of a percentage of retirement plan benefits. If a retirement plan member owes money to the plan and is receiving benefit payments from another source, the U.S. Social Security Act allows for a benefit offset of up to 10 percent of that member's benefits.
Benjamin Graham
Benjamin Graham (1894-1976) was an economist, investor, author, and adjunct professor. Considered one of the first experts in security analysis, Graham published The Intelligent Investor in 1949. Notably, Warren Buffet was one of Graham's students at Columbia University.