Business Finance ( Concept of Interest & Investment Flashcards
is an asset or item acquired with the goal of generating income or
appreciation.
Investment
refers to an increase in the value of an asset over time.
Appreciation
An investment
always concerns the outlay of some asset today—________,________,or ______—in hopes
of a greater payoff in the future than what was originally put in.
Time, money, or effort
can refer to any mechanism used for generating future
income, including bonds, stocks, real estate property, or a business,
among other examples.
Investment
has the goal of generating income and increasing value
over time.
The act of investing/ investing
Investment includes the purchase of ______, ______, or ____ _____ ______, among
other examples.
Bonds, stocks, or real estate property
any action that is taken in the hopes of raising future revenue
Investment
Within a country or a nation, _______ _______ is related to investments.
economic growth
When
companies and other entities engage in sound business investment practices,it
typically results in economic growth.
Economic Investments
if an entity is engaged in the production of goods, it may
manufacture or acquire a new piece of equipment that allows it to produce more
goods in a shorter period of time.
Economic Investments
GDP stands for
Gross domestic product
provides a variety of services to individuals and
businesses, including many services that are designed to assist individuals and
businesses in the process of increasing their wealth.
Investment Vehicles or Investment Bank
may also refer to a specific division of banking related
to the creation of capital for other companies, governments, and other entities.
Investment Banking
What can Investment banks do?
underwrite new debt and equity securities for all types of
corporations, aid in the sale of securities, and help to facilitate mergers and
acquisitions, reorganizations, and broker trades for both institutions and private
investors.
may also provide guidance to companies who are
considering issuing shares publicly for the first time, such as with an initial public
offering (IPO).
Investment banks/ Investment vehicles
may be the most well-known and simple type of investment.
Stocks
you’re buying an ownership share in a publicly traded company.
Stocks
Many of the biggest companies in the country — think ___________-, _______and
_________— are publicly traded, meaning you can buy stock in them.
General Motors, Apple, and Facebook
sell stocks to investors.
Brokers
you’re essentially lending money to an entity.
Bonds
Generally, this is a business or a government entity.
Bonds
Companies issue _____
bonds, whereas local governments issue _______ bonds. The U.S. Treasury issues
______bonds.
Corporate,
Municipal,
Treasury
The rate of return for ______ is typically much lower than it is for stocks, but
______also tend to be lower risk.
Bonds
especially, however, are considered a very safe investment.
Treasury Bonds
is a pool of many investors’ money that is invested broadly in
a number of companies.
Mutual funds
can be actively managed or passively
managed.
Mutual Funds
has a fund manager who picks companies and
other instruments in which to put investors’ money.
Actively Managed Fund
try to beat the
market by choosing investments that will increase in value.
Fund Managers
simply tracks a major stock market index like the Dow Jones Industrial
Average or the S&P 500.
passively managed fund
only in stocks, others only in
bonds and some in a mixture of the two.
Mutul funds
carry many of the same risks as stocks and bonds, depending
on what they are invested in.
Mutual Funds
The risk is lesser, though, because the investments
are inherently diversified.
Mutual Funds
are similar to mutual funds in that they are a
collection of investments that tracks a market index.
Exchange-traded funds
are bought and sold on the stock
markets.
Exchange Traded Funds
Their price fluctuates throughout the trading day, whereas mutual funds’
value is simply the net value of your investments.
Exchange traded funds
are often recommended to new investors because they’re more
diversified than individual stocks.
Exchange traded funds
is a very low-risk investment.
Certificate of deposit
You give a bank a
certain amount of money for a predetermined amount of time.
certificates of deposit
The longer the loan period, the higher your interest rate.
certificate of deposit
There are no major risks to
certificates of deposit
That said, you
have to make sure you won’t need the money during the term of the —-, as there
are major penalties for early withdrawals.
certificates of deposit
There are a number of types of retirement plans.
Workplace retirement plans,
sponsored by your employer, include 401(k) plans and 403(b) plans.
If you don’t
have access to a retirement plan, you could get an individual retirement plan (IRA),
of either the
traditional or roth variety
aren’t a separate category of investment, per se, but a vehicle for
making investments, including purchasing stocks, bonds and funds.
Retirement plans
The biggest
advantage for retirement plans
is that you put in
pre-tax dollars. You won’t pay taxes on the money until you withdraw it in
retirement, when you will presumably be in a lower tax bracket.
The risks for the
investments are the same as if you were buying the investments outside of a
retirement plan
Many people use _____ as part of their retirement savings plan.
annuities
you purchase a contract with an insurance company and, in
return, you get periodic payments.
annuities/annuity
The payments may begin right away or at a
specified future date.
Annuities
They may last until death or only for a predetermined period
of time.
Annuities
fairly low risk, they aren’t high-growth.
Annuities
They make a
good supplement to retirement savings, rather than an integral source of funding.
Annuities
a fairly new investment option.
Cryptocurrencies
is the most
famous cryptocurrency, but there are countless others.
Bitcoin
are
digital currencies that don’t have any government backing.
Cryptocurrencies
often have wild fluctuations, making them a very risky investment.
Cryptocurrencies
are physical products you can buy.
Commodities
examples of commodities
wheat, barley and corn, or energy products like oil, coal or solar
power. Precious metals like gold and silver (most common)
investing run the risk that the price of the product will go down
quickly.
Commodities
can greatly change the value of something
Political actions
can impact the value of agricultural products.
weather
helps you put together an investing plan that will utilize a
number of the above types of investments.
Financial Advisor
4 ways to reduce your investment risk
- Have a diversified portfolio of onvestments
- Know your investment goals
- Keep a close eye on your investments
- Watch out for scammers
Explain how important investment is in a business.
-impromtu.
Among the types of investments which do you think is the easiest. Why?
-impromptu.
The most basic finance-related formula
Computation of Interest
is earned or incurred for the use of the principal amount over
the relevant time period.
Interest
If the interest earned or incurred is always based on the original principal,
then _______ ________ is assumed.
simple interest
is simply earning interest on interest.
Compound Interest
The usual assumption in most business transaction is to use the
compound interest
