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Glossary wiki Early withdrawal

Early withdrawal
If you withdraw assets from a fixed-term investment, such as a certificate of deposit (CD), before it matures, it is considered an early withdrawal.If you withdraw from an individual retirement account (IRA) or tax-deferred retirement savings plan before you turn 59 1/2, it is also considered early.If you withdraw early, you usually have to pay a penalty imposed by the issuer (in the case of a CD) or the government (if it's an IRA or other tax-deferred or tax-free savings plan). However, you may be able to use the money in your account without penalty under certain circumstances. For example, if you withdraw IRA assets to pay for higher education, to buy a first home, or for other qualified reasons, the penalty is waived. But taxes will still be due on the tax-deferred portion of the withdrawal.

Earned income
Earned income is pay you receive for work you perform, including salaries, wages, tips, and professional fees. Your earned income is included in your gross income, along with unearned income from interest, dividends, and capital gains. If you have earned income, you're eligible to contribute to an individual retirement account (IRA).

Earned income credit (EIC)
The earned income tax credit (EIC) reduces the income tax of that certain low-income taxpayers would otherwise owe. It’s a refundable credit, so if the tax that’s due is less than the amount of the credit, the difference is paid to the taxpayer as a refund.To qualify for the EIC, a taxpayer must work, earn less than the government’s ceiling for his or her filing status and family situation, meet a set of specific conditions, and file the required IRS schedules and forms.

Earnings
In the case of an individual, earnings include salary and other compensation for work you do, as well as interest, dividends, and increases in the value of your investments.From a corporate perspective, earnings are profits, or net income, after the company has paid income taxes and bond interest.

Earnings estimate
Professional stock analysts use mathematical models that weigh companies' financial data to predict their future earnings per share on a quarterly, annual, and long-term basis. Investment research companies, such as Thomson Financial and Zacks, publish averages of analysts' estimates for stock market professionals follow closely. These averages are called consensus estimates.

Earnings momentum
When a company's earnings per share grow from year to year at an ever-increasing rate, that pattern is described as earnings momentum. One example might be a company whose earnings grow one year at 10%, the next year at 18%, and a third year at 25%. In many cases, this momentum triggers an increase in the stock's share price as well, as investors identify the stock as one they expect to continue to grow and increase in value.

Earnings per share (EPS)
Earnings per share (EPS) is calculated by dividing a company's total earnings by the number of outstanding shares. For example, if a company earns $100 million in a year and has 50 million outstanding, or existing, shares, the earnings per share are $2. Earnings per share can also be calculated on a fully diluted basis, by adding outstanding stock options, rights, and warrants to the outstanding shares. The results report what EPS would be if all of those options, rights, and warrants were exercised and the company had to issue more shares to meet its obligations.Earnings and other financial measures are provided on a per share basis to make it easier for you to analyze the information and compare the results to those of other investments.

Earnings surprise
When a company's earnings report either exceeds or fails to meet analysts' estimates, it's called an earnings surprise. An upside surprise occurs when a company reports higher earnings than analysts predicted and usually triggers an increase in the stock price. A negative surprise, on the other hand, occurs when a company fails to meet expectations and often causes the stock's price to fall. Companies try hard to avoid negative surprises since even a small deviation can create a big stir.

EBITDA
Earnings before interest, taxes, depreciation, and amortization are commonly shortened to EBITDA. EBITDA reports a company’s profits before interest on debt and taxes owed or paid to the government are subtracted. EBITDA is used to compare the profitability of a company with other companies of the same size in the same industry who may have different levels of debt or different tax situations.

Economic cycle
An economic cycle is a period during which a country’s economy moves from strength to weakness and back to strength. This pattern repeats itself regularly, though not on a fixed schedule. The length of the cycle isn’t predictable either, and may be measured in months or in years. The cycle is driven by many forces — including inflation, the money supply, domestic and international politics, and natural events. In developed countries, the central bank uses its power to influence interest rates and the money supply to prevent dramatic peaks and deep troughs, smoothing the cycle’s highs and lows.This up and down pattern influences all aspects of economic life, including the financial markets. Certain investments or categories of investment that thrive in one phase of the cycle may lose value in another. As a result, in evaluating an investment, you may want to look at how it has fared through a full economic cycle.

Economic indicator
Economic indicators are statistical measurements of current business conditions. Changes in leading indicators, including those that track factory orders, stock prices, the money supply, and consumer confidence, forecast short-term economic strength or weakness. In contrast, lagging indicators, such as business spending, bank interest rates, and unemployment figures, move up or down in the wake of changes in the economy. The Conference Board, a nonprofit business research firm, releases its weighted indexes of leading, lagging, and coincident indicators every month. Though the individual components are also reported separately throughout the month, the indicators provide a snapshot of the economy's overall health.

Education savings account (ESA)
You can put up to $2,000 a year into a Coverdell education savings account (ESA) that you establish in the name of a minor child. The assets in the account can be invested any way you choose.There is no limit on the number of accounts you can set up for different beneficiaries, but no more than a total of $2,000 can be contributed in a single beneficiary’s name in any one year. If you choose, you may switch the beneficiary of an ESA to another member of the same extended family.Your contribution is not tax deductible. But any earnings that accumulate in the account can be withdrawn tax free if they're used to pay qualified educational expenses for the beneficiary until he or she reaches age 30. The costs can be incurred at any level, from elementary school through a graduate degree, or at a qualified post-secondary technical or vocational school. There are no restrictions on using ESA money in the same year the student uses other tax-free savings, or the student, parent, or guardian uses tax credits for educational expenses. But you can’t take a credit for expenses you covered with tax-free withdrawals.To qualify to make a full $2,000 contribution to an ESA, your modified adjusted gross income (MAGI) must be $95,000 or less, and your right to make any contribution at all is phased out if your MAGI is $110,000 if you’re a single taxpayer. The comparable range if you’re married and file a joint return is $190,000, phased out at $220,000.

Effective tax rate
Your effective tax rate is the rate you actually pay on all of your taxable income. You find your annual effective rate by dividing the tax you paid in the year by your taxable income for the year. Your effective rate will always be lower than your marginal tax rate, which is the rate you pay on the income that falls into the highest tax bracket you reach.For example, if you file your federal tax return as a single taxpayer, had taxable income of $75,000, and paid $15,332 in federal income taxes, your federal marginal tax rate would be 28% but your effective rate would be 20.4%. That lower rate reflects the fact that you paid tax on portions of your income at the 10%, 15%, and 25% rates, as well as the final portion at 28%.

Efficient market
When the information that investors need to make investment decisions is widely available, thoroughly analyzed, and regularly used, the result is an efficient market. This is the case with securities traded on the major US stock markets. That means the price of a security is a clear indication of its value at the time it is traded. Conversely, an inefficient market is one in which there is limited information available for making rational investment decisions and limited trading volume.

Efficient market theory
Proponents of the efficient market theory believe that a stock's current price accurately reflects what investors know about the stock.They also maintain that you can't predict a stock's future price based on its past performance. Their conclusion, which is contested by other experts, is that it's not possible for an individual or institutional investor to outperform the market as a whole. Index funds, which are designed to match, rather than beat, the performance of a particular market segment, are in part an outgrowth of efficient market theory.

Electronic benefits transfer (EBT)
Electronic benefits transfer, or EBT, is a system through which recipients of certain government benefits receive and spend funds electronically, using a plastic EBT card similar to a bank debit card.Benefits are deposited electronically into the recipient’s program account. The recipient can then use his or her EBT card to make purchases, which are debited from the account.All states now use EBT in addition to traditional paper coupons to distribute food stamp benefits. Some states also use EBT to disburse benefits for other programs, including the US Department of Agriculture’s Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and the Temporary Assistance to Needy Families (TANF) programs.There are no fees when recipients use EBT cards for purchases, but fees may apply to cash withdrawals from ATMs or electronic balance inquiries.

Electronic bill payment
If you have an electronic bill payment arrangement with your bank, your bills are sent to an account you designate and the bank pays them automatically each month by deducting the money from that account and transferring it to your payees, either electronically or by check.The advantage of using electronic payment is that your bills will be paid on time, though it is your responsibility to ensure that there is enough money on deposit to cover what’s due. When the payments are made to credit accounts with the same bank, you may be offered a slightly reduced interest rate for using the service. However, you’ll want to investigate whether there’s an added fee for automatic payment and how much flexibility you have in determining how much of a bill’s balance due is paid each month on credit accounts where you have the option to pay less than the full amount owed.

Electronic bill presentment
If you pay bills online, you may be able to take advantage of electronic bill presentment, a paper-free method of reporting your outstanding charges and the amount due. The lender may either email your monthly statement or notify you via email that the statement is ready for viewing at a secure website.

Electronic check conversion
Electronic check conversion is a payment process in which you give a payee a check, but the actual payment is processed as an electronic funds transfer. The payment is automatically debited from your account using the account, routing information, and bank ID information on your check, which is either voided and returned to you or destroyed.A business must notify you before it uses electronic check conversion to process your payment. Keep in mind that an electronic funds transfer will be completed much more quickly than a check, so it’s important to have the funds available in your account before you authorize an electronic check conversion. As with any other type of electronic funds transfer, you have the right to ask your bank to investigate any errors or misuses.

Electronic communications network (ECN)
An ECN is an alternative securities trading system that collects, displays, and executes orders electronically without a middleman, such as a specialist or market maker. Trading on an ECN allows institutional and individual investors to buy and sell anonymously. Further, ECNs facilitate extended, or after-hours, trading. ECN trade execution can be faster and less expensive than trades handled through screen-based or traditional markets, though the volume is sometimes thin. However, some ECNs have been approved for official stock exchange status, expanding the number of stocks that can be traded on their systems.

Electronic Data Gathering, Analysis, and Retrieval System (EDGAR)
EDGAR is an electronic database that contains all the corporate financial reports filed with the Securities and Exchange Commission (SEC).Any company with more than $10 million in assets and over 500 shareholders, or that is listed on a major exchange in the United States or quoted on the Over the Counter Bulletin Board (OTCBB) is required to file prospectuses, an annual 10-K — or audited financial report — three unaudited 10-Qs, notices of insider trades, tender offers, and other detailed company information. Smaller companies may file voluntarily. You can access all EDGAR filings free of charge on the SEC website (www.sec.gov).

Electronic funds transfer
Electronic funds transfer (EFT) is the means by which financial institutions exchange billions of dollars every day without the physical movement of any paper money. Money moves electronically from one bank account to another, usually within 24 hours of a scheduled payment. The system covers all electronic credit and debit money transfers, including direct deposits — which occur when you authorize your employer or other payer to automatically deposit payroll into your bank account — debit card and ATM transactions, online bill payment, wire transfers, and debit transfers — or automatic deductions from your bank accounts to make regular payments.According to the US Department of the Treasury, it costs the federal government only 9 cents to issue an EFT payment as opposed to 86 cents to make a traditional check payment.

Elimination period
If you have disability insurance or long-term care insurance, there’s a waiting period, called the elimination period, from the time you become disabled, or are certified in need of long-term care, and when you begin receiving benefits. You often have a choice of elimination periods — such as 30, 60, or 90 days — when you purchase the insurance, though sometimes the payment gap is dictated by the terms of the policy. In general, the shorter the elimination period the higher the premiums will be for comparable coverage.

Emergency fund
An emergency fund is designed to provide financial back-up for unexpected expenses or for a period when you aren’t working and need income. To create an emergency fund, you generally accumulate three to six months’ worth of living expenses in a secure, liquid account so that the money is available if you need it.It’s a good idea to keep your emergency fund separate from other savings or investment accounts and replenish it if you withdraw. But you don’t have to limit yourself to low-interest savings accounts, and might consider other liquid accounts, such as money market funds, that may pay higher interest. If you’re single or have sole responsibility for one or more dependents, you may want to consider an even bigger emergency fund, perhaps large enough to cover a year’s worth of ordinary expenses.

Emerging market
Countries in the process of building market-based economies are broadly referred to as emerging markets. However, there are major differences among the countries included in this category. Some emerging-market countries, including Russia, have only recently relaxed restrictions on a free-market economy. Others, including Indonesia, have opened their markets more widely to overseas investors, and still others, including Mexico, are expanding industrial production. Their combined stock market capitalization is less than 3% of the worldwide total.

Emerging markets fund
Emerging markets mutual funds invest primarily in the securities of countries in the process of building a market-based economy. Some funds specialize in the markets of a certain region, such as Latin America or Southeast Asia. Others invest in a global cross-section of countries and regions.

Employee Retirement Income Security Act (ERISA)
This comprehensive law, best known by the acronym ERISA, governs qualified retirement plans, including most private-company defined benefit and defined contribution plans, and protects the rights of the employees who participate in the plans. ERISA also established individual retirement arrangements (IRAs), made it easier for self-employed people to set up retirement plans, and made employee stock ownership plans part of the tax code.Among ERISA requirements are that plan participants receive a detailed document that explains how their plan operates, what employee rights are — including qualifying to participate and uniform vesting schedules — and what the grievance and appeals process is.In addition, ERISA assigns fiduciary responsibility to those who sponsor, manage, and control plan assets. This means they must act in the best interests of the plan participants. ERISA rules do not apply to plans provided by federal, state, or local governments, church plans, or certain other plans.ERISA has been amended several times since it was passed in 1974, making some provisions more flexible and others more restrictive. Among the changes were the Consolidated Omnibus Budget Reconciliation Act (COBRA), which provides continuing access to coverage, for a fee, when an employee leaves an employer who offers health insurance, and the Health Insurance Portability and Accountability Act (HIPAA), which protects access to health insurance coverage for employees and their families with preexisting medical conditions when the employee leaves a job that provided coverage and moves to a new job where coverage is also offered.

Employee stock ownership plan (ESOP)
An ESOP is a trust to which a company contributes shares of newly issued stock, shares the company has held in reserve, or the cash to buy shares on the open market. The shares go into individual accounts set up for employees who meet the plan's eligibility requirements. An ESOP may be part of a 401(k) plan or separate from it. If it's linked, an employer's matching contribution may be shares added to the ESOP account rather than cash added to an investment account. If you're part of an ESOP and you leave your job, you have the right to sell your shares on the open market if your employer is a public company.If it's a privately held company, you have the right to sell them back at fair market value. The vast majority of ESOPs are offered by privately held companies.

Employer sponsored retirement plan
Employers may offer their employees either defined benefit or defined contribution retirement plans, or they may make both types of plans available. Any employer may offer a defined benefit plan, but certain types of defined contributon plans are available only through specific categories of employers. For example, 403(b) plans may be offered only by tax-exempt, not-for-profit employers, and 457 plans only by state and municipal governments. SIMPLE plans, on the other hand, can only be offered by employers with fewer than 100 workers. Corporate employers who contribute to a retirement plan can take a tax deduction for the amount of their contribution and may enjoy other tax benefits. However, the plan must meet certain Internal Revenue Service (IRS) guidelines.Offering a retirement plan may also make the employer more attractive to potential employees. However, employers are not required to offer plans. If they do, they can make the plan as generous or as limited as they choose as long as the plan meets the government's nondiscrimination guidelines.

Enhanced index fund
An enhanced index fund chooses selectively among the stocks in a particular index in order to produce a slightly higher return. By contrast, an index fund strives to mirror the performance of a particular index by owning all of the stocks in the index.The goal is to narrowly beat the index by anywhere from a fraction of a percent to two percentage points, but not more. A wider spread would classify the enhanced fund as an actively managed mutual fund rather than an index fund.Enhanced index fund managers may achieve higher returns by identifying the undervalued stocks in the index. Or, they might adjust holdings to include a larger proportion of securities in higher performing sectors, or use other investment strategies, such as buying derivatives. While enhanced index funds may expose you to the risk of greater losses than their plain-vanilla counterparts, they may also offer an opportunity for higher returns.

Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) is designed to ensure that all qualified people have access to credit. It forbids lenders from rejecting credit applicants on the basis of race, gender, marital status, age, or national origin and requires lenders to consider public assistance in the same light as other forms of income.The act says that creditors must approve or reject your application within 30 days if you’ve filed a complete application, and if you ask within 60 days, it must provide an explanation for turning you down. The ECOA requires creditors to provide specific reasons for rejecting you and forbids indefinite or vague explanations.If you feel you’re being discriminated against and the lender does not respond to your complaints, you can contact the attorney general of your state or the government agency that oversees the creditor. By law, the creditor must provide that information. If you can’t get the information from the creditor, you can contact the Federal Trade Commission at www.ftc.gov.

Equity
In the broadest sense, equity means ownership. If you own stock, you have equity in, or own a portion — however small — of the company that issued the stock. Having equity is the opposite of owning a bond or commercial paper, which is a debt the company must repay to you.Equity also means the difference between an asset's current market value — the amount it could be sold for — and any debt or claim against it. For example, if you own a home currently valued at $300,000 but still owe $200,000 on your mortgage, your equity in the home is $100,000.The same is true if you own stock in a margin account. The stock may be worth $50,000 in the marketplace, but if you have a loan balance of $20,000 in your margin account because you financed the purchase, your equity in the stock is $30,000.

Equity fund
Equity funds invest primarily in stock. The stock a fund buys — whether in small, up-and-coming companies or large, well-established firms — depends on the fund's investment objectives and management style.The general approach may be implied by the fund's name or the category in which it places itself, such as large-cap growth or small-cap value. However, a fund's manager may have the flexibility to invest more broadly to meet the fund's objectives.

Equivalent taxable yield
While taxable bonds normally pay higher interest rates than tax-exempt bonds, they sometimes provide a lower overall yield. Finding the equivalent taxable yield lets you determine the minimum interest rate a taxable bond must pay to equal the yield of a comparable tax-exempt bond. The formula for the equivalent taxable yield is tax-exempt interest rate ÷ (100 – your tax rate). So, for example, if a municipal bond pays an annual interest rate of 7%, and your tax rate is 35%, the equivalent taxable yield would be 7 ÷ (100 – 35) = 10.8%. That means that in order to be as attractive an investment as the 7% municipal bond, a taxable bond would need to pay an annual interest rate of 10.8% or more.

Escrow
When someone else holds assets of yours until the terms of a contract or an agreement are fulfilled, your assets are said to be held in escrow. The assets could be money, securities, real estate, or a deed.The person or organization that holds the assets is the escrow agent, and the account in which they are held is an escrow account.For example, if you make a down payment on a home, the money is held in escrow until the sale is completed or the deal falls through. Amounts you prepay to cover property taxes and insurance premiums as part of your regular mortgage payment are also held in escrow until those bills come due and are paid. In that case, you may earn interest on the amount in the escrow account.

Escrow agent
An escrow agent is the person or group that holds certain of your assets in an escrow account while you negotiate the final terms of a contract. For example, if you are buying a home, the escrow agent would hold the down payment you make when your offer is accepted until the purchase is finalized.

Estate
Your estate is what you leave behind, financially speaking, when you die. To figure its worth, your assets are valued to determine your gross estate. The assets may include cash, investments, retirement accounts, business interests, real estate, precious objects and antiques, and personal effects.Then all of your outstanding debts, which may include income taxes, loans, or other obligations, are paid, and those plus any costs of settling the estate are subtracted from the gross estate. If the amount that's left is larger than the amount you can leave to your heirs tax free, you have a taxable estate, and federal estate taxes may be due. Depending on the state where you live and the size of your taxable estate, there may be additional state taxes as well.After any taxes that may be due are paid, what remains is distributed among your heirs according to the terms of your will, the terms of any trusts you established, and the beneficiaries you named on certain accounts — or the rulings of a court, if you didn't leave a will.

Estate tax
Your estate owes federal estate tax on the value of your taxable estate if the estate is larger than the amount you are permitted to leave to your heirs tax free. That amount, which is set by Congress, is $2 million for 2006, 2007, and 2008 and is scheduled to increase to $3.5 million in 2009. Under current law, the estate tax will be eliminated in 2010. Without further Congressional action, the tax will be reinstated in 2011 at 2002 levels. However, modifications may be made before that date.If your estate may be vulnerable to these taxes, which are figured at a higher rate than income taxes, you may want to reduce its value. You could do this by using a number of tax planning strategies, including making nontaxable gifts and creating irrevocable trusts. Further, if you're married to a US citizen and leave your entire estate to your spouse, there are no estate taxes, no matter how much the estate is worth. However, estate taxes may be due when your surviving spouse dies. You may also face estate taxes in your state.

Euro
The euro is the common currency of the European Monetary Union (EMU). The national currencies of the participating countries were replaced with euro coins and bills on January 1, 2002.

Eurobond
A eurobond is an international bond sold outside of the country in whose currency it is denominated, or issued. For example, an Italian automobile company might sell eurobonds issued in US dollars to investors living in European countries. Multinational companies and national governments, including governments of developing countries, use eurobonds to raise capital in international markets.

Eurocurrency
Eurocurrency is any major currency that is deposited by a national government or corporation based outside the country where the bank receiving the funds is located. For example, Japanese yen deposited in a British bank by a Japanese car manufacturer is considered eurocurrency. Eurocurrency is used in international trade and to make international loans.

Eurodollar
Eurodollars are US currency deposited in banks outside the US, usually, but not always in Europe. Certain debt securities are issued in eurodollars and pay interest in US dollars into non-US bank accounts. Eurodollars are a form of eurocurrency.

European Central Bank (ECB)
The European Central Bank is the central bank of the European Monetary Union (EMU), whose member countries use the euro as their currency. The ECB, which is based in Frankfurt, Germany, issues currency, sets interest rates, and oversees other aspects of monetary policy for the EMU.The EMU's National Central Banks (such as the Banque de France and the Deutsche Bundesbank), together with the ECB, form the European System of Central Banks. They play an important role in implementing monetary policy, conducting foreign exchange operations, and maintaining the foreign reserves of member states.

European style option
A listed option that you can exercise only on the last trading day before the expiration date is called a European style option whether it trades on a US exchange, a European exchange, or elsewhere in the world. For example, many index options listed on various US exchanges are European-style options. In contrast, you can exercise an American style option at any point between the day you purchase it and its expiration date. All equity options are American style, no matter where the exchange on which they trade is located.

Ex-dividend
You must own a security by the record date the company sets to be entitled to the dividend it will pay on the payable date. The period between those dates — anywhere from a week to a month or more — during which new investors in the security are not entitled to that dividend is called the ex-dividend period. On the day the ex-dividend period begins, which is the first trade date that will settle after the record date, the stock is said to go ex-dividend. Generally, the price of a stock rises in relation to the amount of the anticipated dividend as the ex-dividend date approaches. It drops back on the first day of the ex-dividend period to reflect the amount that is being paid out as dividend.

Excess contribution
An excess contribution occurs when the salary deferrals or matching contributions of highly compensated employees are higher than the amounts permitted by federal law. If that happens, the company must pay out those amounts to the employees involved before the end of the following tax year or face penalties. Excess contributions are different from excess deferrals, also called after-tax contributions, which employees may legally make to their employer sponsored retirement plans.

Exchange
Traditionally, an exchange has been a physical location for trading securities. Trading is handled, at least in part, by an open outcry or dual auction system. Two examples in the United States are the New York Stock Exchange (NYSE), which has the largest trading floor in the world, and the Chicago Board Options Exchange (CBOE).However, the definition is evolving. Traditional exchanges handle an increasing number of trades electronically, off the floor. NASDAQ and other totally electronic securities markets, without trading floors, have exchange status.As a result, the terms exhange and market are being used interchangeably to mean any environment in which listed products are traded.The term exchange also refers to the act of moving assets from one fund to another in the same fund family or from one variable annuity subaccount to another offered through the same contract.

Exchange rate
The exchange rate is the price at which the currency of one country can be converted to the currency of another. Although some exchange rates are fixed by agreement, most fluctuate or float from day to day. Daily exchange rates are listed in the financial sections of newspapers and can also be found on financial websites.

Exchange traded notes
Exchange traded notes (ETNs) are debt securities issued by a financial institution, listed on a stock exchange, and traded in the secondary market. Unlike regular bonds, there are no periodic interest payments, and your principal isn’t protected. So you could lose some or all of the amount you invest.You can sell your ETN in the secondary market at its current price or hold it until maturity, though that may be 30 years in the future. The price in the secondary market is determined by supply and demand, the current performance of the index, and the credit rating of the ETN issuer. At maturity, the issuer pays a return linked to the performance of the market index, such as a commodity index, to which the ETN is linked, minus the issuer’s annual fee.

Exchange-traded fund (ETF)
Exchange-traded funds (ETFs) are listed on a stock exchange and trade like stock. You can use traditional stock trading techniques, such as stop orders, limit orders, margin purchases, and short sales when you buy or sell ETFs.But ETFs also resemble mutual funds in some ways. For example, you buy shares of the fund, which in turn owns a portfolio of stocks. Each ETF has a net asset value (NAV), which is determined by the total market capitalization of the stocks in the portfolio, plus dividends but minus expenses, divided by the number of shares issued by the fund.ETF prices change throughout the trading day, in response to supply and demand, rather than just at the end of the trading day as open-end mutual fund prices do. The market price and the NAV are rarely the same, but the differences are typically small. That's due to a unique process that allows institutional investors to buy or redeem large blocks of shares at the NAV with in-kind baskets of the fund's stocks.

Exclusion
Medical services that insurance companies do not pay for are called exclusions. A typical exclusion is a wartime injury or a self-inflicted wound. But coverage for certain pre-existing conditions, or health problems you had before you were covered by the policy, may also be excluded on some policies.

Executor/Executrix
When you die, your executor administers your estate and follows the directions provided in your will. Among the executor's duties are collecting and valuing your assets, paying taxes and debts out of those assets, and distributing the remaining assets to your heirs. You may want to appoint a family member or close friend as executor. Or you may choose a professional, such as a lawyer or bank trust officer.What some people do is name a professional and a friend or family member to work together, especially if the estate is large or there are potential complications.Executors are entitled to be paid for their work, which ends when your estate is settled, usually anywhere from one to three years after your death. Professional executors always charge, while friends and family may or may not.

Exemption
An exemption is a fixed dollar amount that you can subtract from your adjusted gross income to reduce your taxable income. The per-person exemption amount is set by Congress each year, and typically increases from year to year. If you’re over 65 or blind, you qualify for an additional exemption. Taxpayers whose adjusted gross income is higher than the government limit may not qualify for an exemption.

Exercise
When you act on a buying or selling opportunity that you have been granted under the terms of a contract, you are said to exercise a right. Contracts may include the right to exchange stock options for stock, buy stock at a specific price, or buy or sell the security or product underlying an option at a specific exercise price.For example, if you buy a call option giving you the right to buy stock at $50 a share, and the market price jumps to $60 a share, you'd likely exercise your option to buy at the lower price.

Exercise price
An option's exercise price, also called the strike price, is the price at which you can buy or sell the stock or other financial product that underlies that option. The exercise price is set by the exchange on which the option trades and remains constant for the life of the option.However, the market value of the underlying investment rises and falls continuously during the period in response to market demand.

Expense ratio
An expense ratio is the percentage of a mutual fund's or variable annuity's total assets deducted to cover operating and management expenses.Those expenses include employee salaries, custodial and transfer fees, distribution, marketing, and other costs of offering the fund or contract. However, they don't cover trading costs or commissions. For example, if you own shares in a fund with a 1.25% expense ratio, your annual share is $1.25 for every $100 in your account, or $12.50 on an account valued at $1,000.Expense ratios vary from one fund company to another and among different types of funds. Typically, international equity funds have among the highest expense ratios, and index funds among the lowest. Similar differences in expense ratios are characteristic of different variable annuity investment accounts.

Expiration cycle
Equity and index options expire on a predictable four-month schedule, two of which are determined by the expiration cycle to which the underlying instrument has been randomly assigned and two by when you purchase the option. There are three expiration cycles, one beginning in January, one in February, and one in March. Each cycle includes four months, and an option always expires in two of those months. The other two expiration months are the month in which it is purchased and the following month.For example, if you purchase an option on an equity assigned to Cycle 1, which includes January, April, July, and October, between January 1 and the third Friday in January you have a choice of contracts expiring in January and in February — because they are the current month and the following one — or in April or July — because they are the next two months in Cycle 1.Similarly, if you purchased an option on the same equity in April, you’d also have a choice of four expiration dates: April and May — the current and following months — and then July and October, the next two months in Cycle 1.

Expiration date
The expiration date is the day on which an options contract expires and becomes worthless. Listed options always expire on the Saturday following the third Friday of their expiration month. For example, if you hold an American-style September equity option, you can exercise it any time before the end of trading on the third Friday in September, or whatever cutoff time your brokerage firm sets. In contrast, European-style options can be exercised only at expiration, usually on Friday.Under specific circumstances, listed options will be exercised automatically at expiration unless the owner gives instructions not to exercise them. Unlike the standard term of listed option, the expiration date of an over-the-counter option is negotiated at the time of the trade.