Capital Gain or Loss The difference between the sales price and the purchase price of a capital asset. When that difference is positive, the difference is referred to as a capital gain. When the difference is negative, it is a capital loss. The tax rate on a capital gain depends on how long the security was held.
Certificate of Deposit (CD) A Certificate of Deposit (CD) is a note issued by a bank for a savings deposit that the individual agrees to leave invested in the bank for a certain term. At the end of this term, on the maturity date, the principal may either be repaid to the individual or rolled over into another CD. The bank pays interest to the individual, and interest rates between banks are competitive. Monies deposited into a Certificate of Deposit are insured by the FDIC, thus they are a low-risk investment and a good way of maintaining principal. Maturities may be as short as a few weeks or as long as several years. Most banks set penalties for premature withdrawal of monies from a Certificate of Deposit.
Commission A commission is a fee charged by an agent making transactions of buying or selling securities for another individual. This fee is generally a percentage based on either the number of stocks bought or sold or the value of the stocks bought or sold.
Credit Risk Credit risk refers primarily to the risk involved with debt investments, such as bonds. Credit risk is essentially the risk that the principal will not be repaid by the issuer. If the issuer fails to repay the principal, the issuer is said to default.