Ch 6 - Investment opportunities Flashcards
What is investing?
investing is putting economic resources into something with the intention of making monetary gain
What are the objectives of investment schemes?
- earn cash return
- make a capital gain
What are some types of investment? (min 4)
- term deposits
- savings accounts
- government bonds
- debentures
- online investment accounts
- shares in companies
- unsecured notes
- property
- trusts
- superannuation
- other assets
What is the difference between speculating and investing?
- investing ~ when you choose an investment that has a specified return
- speculating ~ a gamble for the chance of making a large profit
What is risk vs return?
The measure of the risk you will lose your investment compared to the the return you will gain
If you have a low risk what is the level of return?
low return
If you have a high return what is your level of risk?
high risk
How do you calculate rate of return?
profit earned / amount invested = rate of return
How do you calculate rate of return after tax?
profit after tax / amount invested = rate of return after tax
What is compound interest?
a percentage is applied to the amount owed at the time or the interest earned in the first year not returned to the investor
What is simple interest?
a percentage is applied to the amount invested/total owed
How do you calculate interest?
principle x rate x time = interest
How do you calculate the future value from an interest rate period?
principle x (1 + rate)^number of periods = future value
