16 - How much should I invest?

Question 1

What is the difference between qualitative and quantitative data?

Answer 1

Qualitative data makes statements (I want to be able to visit the south of France for 2 weeks every year).
Quantitative data provides numbers for those statements (need $10,000 for this goal).

Question 2

What are the 4 personal factors that affect savings?

Answer 2

1. Type of return desired
2. Risk tolerance
3. Inflation
4. General economic factors

Question 3

What are the 3 investment returns?

Answer 3

1. Interest
2. Dividends
3. Capital Gains

Question 4

What is the difference between net and gross returns?

Answer 4

Net return is equal to Gross returns less costs and fees.

Question 5

What is the relationship between risk and return?

Answer 5

In general, an investment with a higher risk offers greater return.

Question 6

What is the formula for real rate of return?

Answer 6

Real rate of return = (nominal interest rate - inflation rate)

Question 7

What is the formula for the real rate of return after taxes?

Answer 7

{(nominal interest rate) x (1-MTR) - (inflation rate)}/(1 + inflation rate)

Question 8

Define Fiscal Policy.

Answer 8

Determines how the gov’t will raise income through taxation an how the gov’t wil spend that income.

Question 9

Define Monetary Policy.

Answer 9

How the gov’t manages the money supply.