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77 Cards in this Set
- Front
- Back
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what must beat what to make money |
inflation and taxes!
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what is saving?
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putting your money aside for future use
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what is investing?
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putting your money to work
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Principal is?
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the money you deposit
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what is simple interest
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paid one time a year at the end of the year on the ave. balance in the account
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what is compound interest?
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is paid on the principal plus any previously earned int.
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what is the FDIC
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Fed. Deposit Ins. Corp.
- insures depositors money up to $100,000 totally |
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What is the third most important factor of savings?
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liquidity
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what is liquidity
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- the case and speed with which savings can be converted into money
- passbook is most flexible |
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insurance should be based on how much you ____, not how much you can _____
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need
afford |
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one should have how many policies per person
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one!
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when were stock mutual funds started?
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1920's
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there is no other ownership that keeps out running inflation except for
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stocks!
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general rule of investing
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"the greater potential rate of return, the greater the risk"
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Diversification
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helps reduce the risk of total loss
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what is a bond
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a printed promise to pay a definite amount of money with interest at a specified future date and time
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when one buys a bond they are a ____? with stocks?
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- loaner
- owner |
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you lend money to whom with a bond
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government
municipality corporation |
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what are government bonds?
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one of the safest and most popular bonds, purchased through US savings banks
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government bonds are the safest investment why
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they are backed by the government
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what are junk bonds/high yield
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businesses in difficulty raise $ and offer high int. rates to get people to buy
- very risky! |
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Stocks represent?
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ownership
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a share is?
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unit of ownership
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stockholders are
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investors in stock
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how does one make a profit with stock
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- dividends
- capital gains |
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what are dividends
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earned when a company makes a profit and shares
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what are capital gains
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when stock is sold for more than its purchase price
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you never gain or lose until
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you sell
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one should invest only what one can
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afford to lose
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to minimize risk some investors invest only in
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blue-chip stock
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blue chip stocks are sold by well-established coroporations that have?
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- reputation for financial stability
- superior management - record of growth and earnings |
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blue chips are low risk yet
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cost more
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blue chips value does not change rapidly and most return comes from
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dividends
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investors buy and sell in 2 ways
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- stock exchanges
- NASDAQ |
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transactions are held by
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brokerage firm
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the person who handles the transaction is
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stockbroker
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what is a stock exchange
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a location where orders to buy and sell stock are sent & carried out
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largest stock exchange
- where? |
New York Stock Exchange
- Wall Street, New York |
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what is the NASDAQ
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National Association of Securties Dealers Automated Quotation system
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what does the Nasdaq do?
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electronically links brokerage firms
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stocks are bought and sold through what method
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auction method
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2 most common types of stock
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common & preferred
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what is preferred stock
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- has preference of payment over common
- non-voting share - pays a fixed dividend |
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what is common stock
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- voting stock
- doesn't pay a fixed dividend - dividends are set by the Board of Dir. |
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2 Classes of Stock
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- blue chip
- growth stock |
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-blue chip income?
- growth stock income? |
- dividends
- cap. gains |
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What if you dont have $ to invest? or don't want to invest in stocks and bonds?
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Mutual Funds!!
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what is a mutual fund
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a group of investments owned by many investors - investors buy shares of fund and pool their $
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what do you get from a mutual fund
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diversification - personal management
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what is the minimum investment for MF
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1,000
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your value of investment changes with
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value of stocks & bonds purchased by the fund
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which funds perform the best
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index
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what is the SEC
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Securities and Exchange Committee
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who created the SEC? when?
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congress
- after crash of '29 |
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what is the SEC responsible for?
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enforcing the laws concerning the trading of stock and bonds
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what else does the SEC do
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- licenses stock brokers & investment advisors
- reduces the number of dishonest investment offers made to consumers - has power to shut down and prosecute |
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what is major job of SEC
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prevent insider trading
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what is insider trading
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stock info not made available to general public
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whats a 401k
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-tax deffered
-offered by employer -invested in stock market, MF -some companies allowed to choose -some employers match all or % -portable |
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whats a IRA
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- Individual Retirement account
- 3,000 for single, more for married couple - traditional is tax defferd |
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whats a roth IRA
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- you pay taxes before investing
- when you draw money is not taxed - good choice for young people - dont ever have to withdrawl |
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you can take money out of a roth IRA without penalty after how many years? for what reasons?
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- 5 years
- home, education, medical emergency |
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what is real estate
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any kind of property
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what is the largest single investment Americans will ever make
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their home
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the law allows you earn how much in capital gains w/out paying income tax
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500,000
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You may also deduct what on income
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interest and property tax
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what are the advantages of owning property that is not used by you
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income and capital gains
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A certificate of deposit (CD) must be held for a set amount of time such as six months or a year |
TRUE |
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Compound Interest refers to money earned from buying a tax-exempt investment |
False |
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A share of stock represents ownership in a company |
True |
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A mutual fund is an investment issued by a state or local government agency |
False |
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Treasury Bonds are a safer investment than real estate |
True |
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The lowest interest rate is usually earned on a: A. money-market account B. Passbook account C. CD D. Mutual Fund |
B. Passbook Account |
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The total interest earned on $100 for two years at 10% (compounded annually) would be A. $2 B. $21 C. $11 D. $10 |
B. $21 |
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Based on the rule of 72, money earning 6% would take how many years to double? A. 6 B. 8 C. 9 D. 12 |
D. 12 |
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An example of a company's debt is a: A. corporate bond B. share of stock C. mutual fund d. municipal bond |
A. corporate bond
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The investment with the most risk would be: A. saving account B. US Treasury bonds C. corporate stocks D. corporate bonds |
C. corporate stocks |
