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Intro to Business > 19.1 Saving and Investment Planning > Flashcards

19.1 Saving and Investment Planning Flashcards

1
Q
  • people buy stocks and bonds managed by an investment company
  • money from many investors are used to invest in a variety of securities
  • allow investors spread out their risk among many investments
A

mutual funds

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2
Q

What are the safest investments?

A

investments made with the federal government

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3
Q

this type of investment invests in businesses/entrepreneurs to receive a portion of the profits

  • bonds
  • venture capitalist
  • commodities
  • collectibles
A

venture capitalist

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4
Q

a good savings plan or investment should ____ a reasonable return

A

a good savings plan or investment should earn a reasonable return (person should make money from it)

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5
Q

interest that is computed on the amount saved plus the interest previously earned

A

compound interest

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6
Q

if a stock increases in value and is then sold for more than its original cost

A

capital gain

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7
Q

goal for those who desire financial security in the future

A

long term growth

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8
Q

earnings from most savings and investments are ____

A

taxed

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9
Q
  • allows you to earn a higher interest rate than regular savings account
  • usually requires a minimum deposit of $100 to $1000 or more
  • must leave money on deposit for a certain time period
  • penalties charged if money is withdrawn early
A

certificate of deposit / CD

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10
Q
  • grain, livestock, precious metals, currency, financial instruments
  • investors purchase these in hopes of higher market prices in the future
  • very risky
A

commodities

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11
Q

people who want income for current living expenses

A

current income

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12
Q

assurance that the money you have invested will be returned to you

A

safety

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13
Q

A person who desires high income from an investment would be most concerned with:

  • safety
  • return
  • liquidity
  • risk
A

return

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14
Q

_____ interest is when your account earns interest on top of interest

  • variable
  • simple
  • compound
  • none of these
A

compound

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15
Q

Which of the following is investing for current income?

  • retired person who needs to pay for living expenses
  • business manager planning for retirement
  • student putting away money for college
  • family that wants to buy a vacation home
A

retired person who needs to pay for living expenses

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16
Q

money you receive for letting others use your money

A

interest

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17
Q

savings accounts at most financial institutions are insured up to $250,000 by the _____

A

federal government

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18
Q

______ interest is when the rate changes

A

variable interest is when the rate changes

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19
Q

On which type of interest would you earn more?

simple interest or compound interest

A

compound interest

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20
Q
  • old coins, works of art, antique furniture, other rare items
  • bought with the hopes that their value will increase
A

collectibles

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21
Q

The most liquid investment listed here is:

  • rare coins
  • real estate
  • a savings account
  • a house
A

savings account

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22
Q

which investment is considered low risk (more than one)

  • certificate of deposit
  • stock
  • commodities
  • money market account
  • mutual fund
  • savings account
  • venture capitalism
A
  • certificate of deposit (CD)
  • money market account
  • savings account
23
Q

this type of investment deals with grain, livestock and precious metals

  • stocks
  • collectibles
  • commodities
  • corporate bonds
A

commodities

24
Q

Why do people invest in real estate?

A
  • people purchase their own home for the sense of security and stability (they pay the mortgage every month and when they sell it can make all that money back - hopefully)
  • people purchase property for rental income
  • some buy vacant property in hopes that its value will increase
  • examples - housing, farmland, apartment buildings and shopping malls
25
Q

When you invest money with individuals or businesses, it usually earns _____ interest than that paid by the government because there is ____ safety.

A

when you invest money with individuals or businesses, it usually earns higher interest than that paid by the government because there is less safety (there is a chance you won’t get money back)

26
Q

the percentage of money earned on your savings or investment over a year

A

yield

aka - rate of return & annual yield

27
Q

a _____ is made up of a group of stocks

  • bond fund
  • securities fund
  • commodity
  • mutual fund
A

mutual fund

28
Q

What are the 2 major financial goals of every saver and investor?

A

income or growth

29
Q

What are some choices for your saving and investing dollars?

A
  • savings plans: savings account, certificate of deposit, money market account
  • securities: stock investments, bond investments, mutual funds
  • alternative investments: real estate, commodities, collectibles
30
Q

What are two reasons people save?

A
  1. some save for years for a down payment to buy a home
  2. some save for emergencies
31
Q

______ is using your savings to earn even more money

A

investing is using your savings to earn even more money

32
Q

true or false

investments such as commodities, bonds and stocks are FDIC insured

A

false

only savings plans (savings acct, CD’s, money market account) are insured

33
Q
  • pays a variable interest rate based on government and corporate securities
  • do not require long term deposits
  • have a large minimum balance requirement
  • earn higher interest than regular savings account but less than CD’s
A

money market account

34
Q

A ____ company is a larger company that owns a smaller company

A

a parent company is a larger company that owns a smaller company

35
Q

means you don’t have to pay taxes on that income

A

tax exempt investments

36
Q

using your savings to earn more money

A

investing

37
Q

Higher yields = ____ risk of loss

A

higher yields equal greater risk of loss

38
Q
  • a savings plan with a low balance
  • can deposit and withdraw money as needed
  • pay interest
A

savings account

39
Q
  • lending money for use by businesses and governments
  • common investment
  • company or government uses money invested for their business activities
A

bond investments

40
Q

when an investment is sold for less than its original cost

A

capital loss

41
Q

What are 4 factors to consider when selecting an investment?

A
  1. safety & risk - how likely are you to get your money back?
  2. potential return - how much money are you going to earn?
  3. liquidity - how quickly can it be changed to cash?
  4. taxes - do you have to pay taxes on money earned?
42
Q

How does the economy benefit when savings are invested and used?

A
  • People borrow to pay for homes, cars, college - when this money is spent the demand for goods and services increases so more jobs are created and more people have money to spend
  • Businesses borrow to operate or expand their business - this creates jobs and expands economic activity so more people have money to spend
  • Governments borrow for highways, schools and other public services - creates more jobs
43
Q

When you buy a ___ of ____ , you become part owner of a company

A

when you buy a share of stock, you become part owner of a company

44
Q

investments that can be turned into money quickly are called ____

A

liquid

45
Q

the percentage rateequal to the total amount of interest that a $100 deposit would earn based on a 365 day period

A

annual percentage yield (APY)

46
Q

requires that financial institutions give consumers information to compare savings accounts

A

The Truth in Savings Act (TISA)

47
Q

____ represents debt

A

bonds

48
Q

What helps eliminate confusion caused by different interest calculation methods?

A

annual percentage yield (APY)

49
Q

_____ is done after building up some savings

A

investing is done after building up some savings

50
Q

What are stock investments?

A
  • when you buy a share of stock
  • stock purchase made directly or indirectly through mutual funds
  • very common way of investing
  • results in capital gain or capital loss
51
Q

the ease with which an investment can be changed into cash without losing its value

A

liquidity

52
Q

the storage of money for future use

A

saving

53
Q

Which is more liquid?

$5000 on deposit in bank or owning a piece of land that you bought for $5000

A
  • the money in the bank
  • if you need that money right away you just go to bank and withdraw it
  • even though the land is a safe investment it might be difficult to sell the land right away and get the cash needed

Intro to Business (41 decks)

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