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Part: 5 Here's Our Advice > Glossary - Pg. 286

Glossary 286 compounding period Indicates how often interest is paid or added to principal. For example, a three-month com- pounding period (quarterly compounding) indicates that the interest is paid or is calculated at three-month intervals. conduit (or rollover) An individual retirement account established to accept a rollover from a qualified retirement plan. Funds in a conduit IRA subsequently may be rolled into another qualified retirement plan. consumer price index (CPI) A relative measure of the cost of living. The CPI is measured by changes in the cost of a market basket of goods and services. It is constructed according to the spending patterns of a family of four living in a major city. The CPI can be a misleading indicator of inflation, depending on location, family size, and buying habits. corporate bond High-yield fund; seeks income by generally investing in fixed- income securities, at least 65 percent of which are below an investment-grade rating. corporate bond fund Seeks income by investing in fixed-income securities, pri-marily corporate bonds of various quality ratings. Although income, not capital gain, is the primary objective of most corporate bond shareholders, gains can be significant if the country's general level of interest rates falls. On the other hand, losses can be significant if interest rates rise. current yield The annual rate of return received from an investment based on the income received during a year, compared with the investment's current market price. For example, a bond selling at $800 and paying annual interest of $80 provides a current yield of $80 divided by $800, or 10 percent.