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Personal Finance > Chapter 11 > Flashcards

Chapter 11 Flashcards

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1
Q

type of brokers who buy and sell securities for clients for a reduced commission

A

discount brokers

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2
Q

a document that gives the financial history of a corporation

A

annual report

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3
Q

the spreading of risk among many types of investments

A

diversification

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4
Q

pools money of many investors and buys a large selection of securities

A

mutual funds

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5
Q

a contract issued by an insurance company that pays a series of regular payments, usually after retirement

A

annuity

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6
Q

a rise in the general level of prices

A

inflation

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7
Q

a person who buys and sells securities for clients

A

broker

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8
Q

type of risk when Gov’t actions affect business profits

A

political risk

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9
Q

the right, but not the obligation, to buy or sell a commodity or stock for a specified price within a specified time period

A

option

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10
Q

professional investment planners

A

financial advisors

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11
Q

represents ownership in a corporation

A

stocks

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12
Q

a formula used to estimate time or rate to double your money

A

rule of 72

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13
Q

the use of savings to earn a financial return

A

investing

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14
Q

contracts to buy and sell commodities for a specified price on a specified future date

A

futures

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15
Q

debt obligations of corporations or a government

A

bonds

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16
Q

the chance that an investment’s value will decrease is called ______ ____

A

investing risk

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17
Q

sections of newspapers containing financial date

A

financial pages

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18
Q

provide financial data for interpretation (for example, Moody’s)

A

investor services

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19
Q

type of bond purchased for less than its maturity value

A

discount bond

20
Q

low-priced stocks of small companies that have no track record

A

penny stocks

21
Q

For how long a period of time are Treasury Bills issued?

A

1 year or less

22
Q

final level of realm of investing is called ______

A

speculation

23
Q

a savings plan whereby an individual invests on a regular and planned bases

A

systematic investment

24
Q

What are the reasons for investing ? (3)

A

1) investing helps us beat inflation (gen. rise in prices over time)
2) investing increases wealth (we want money)
3) investing is fun & challenging (we like gambling)

25
Q

What are the stages of investing? (5 stages)

A

1) put-and-take account
2) beginning investing
3) systematic investing
4) strategic investing
5) speculative investing

26
Q

stage of investing: account for emergency funds

A

put-and-take account

27
Q

stage of investing: extra money you have, low risk/low cost

A

beginning investing

28
Q

stage of investing: I am stable, have steady income, high risk tho

A

systematic investing

29
Q

stage of investing: 5-10 yrs. before retirement (start looking)

A

strategic investing

30
Q

stage of investing: risk a large sum to make a quick return in a short amount of time (if you win the lottery)

A

speculative investing

31
Q

What are the types of risks? (5 types)

A

1) interest-rate risk
2) political risk
3) market risk
4) non-market risk
5) company or industry risk

32
Q

low risk = low return

high risk = _________

A

high return

33
Q

What is the criteria for choosing an investment?

A
  • safety
  • high liquidity
  • high dividends or interest
  • growth in value that EXCEEDS the inflation rate
  • reasonable purchase price
  • tax benefits
34
Q

What are some wise investment practices? (7 of these_

A

1) define your financial goals
2) go slowly
3) follow through
4) keep good records
5) seek good investment advice
6) keep investment knowledge CURRENT
7) know your limits

35
Q

great estate = _______ investment

A

great

36
Q

type of risk: risk that the interest won’t keep up w/ inflation

A

interest-rate risk

37
Q

type of risk: anything the gov. institutes (changed laws, ex. packaging laws) affects your business

A

political risk

38
Q

type of risk: depressions, recessions

A

market risk

39
Q

type of risk: no control over (natural disasters, terrorism)

A

non-market risk

40
Q

type of risk: affects one company/business

A

company or industry risk

41
Q

SHORT ANSWER: What are the sources of Financial Information? (6 sources)

A

1) newspapers
2) investor services and newsletters
3) financial magazines
4) brokers/financial advisors
5) annual reports and financial statements
6) online investor education

42
Q

low-to-medium return =

A

low risk

43
Q

medium return =

A

medium risk

44
Q

high return =

A

high risk

45
Q

examples of low risk (w/ low-to-medium return)

A

1) corporate and municipal bonds
2) U.S. government savings bonds
3) treasury securities

46
Q

examples of medium risk & medium return

A

1) mutual funds
2) annuities
3) self-managed retirement accounts
4) real estate

47
Q

examples of high risk & high return

A

1) penny stocks
2) collectibles
3) futures
4) options
5) stocks/trading instruments (commodities)

Personal Finance (7 decks)

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