Chapter 11-Investing Flashcards
Use of savings to earn a financial return
Innvesting
A rise in general level of prices
Inflation
Professional investment planners
Financial advisers
The spreading of risk among three types of investments
Diversification
A formula used to estimate time or rate to double your money
Rule of 72
Represents ownership in a corporation
Stock
Debt obligations of corporations and government
Bonds
Pools money of many investors and buys a large section of securities
Mutual funds
Contracts to buy and sell commodities for a specified price on a specified future dates
Futures
Low-priced stocks of small companies that have no track record
Penny stocks
Buying assets with the hope of earning huge gains over a short period of time
Speculating
A document that gives the financial history of a corporation
Annual report
Government actions that affect business profits
Political risk
A person who buys and sells securities for clients
Broker
Sections of a newspaper containing financial data
Financial pages
Provides financial data for interpretation
Discount
Bond that is purchased for less than its maturity value
Discount bond
The right, but not the obligation, to buy or sell a commodity or stock for a specified price within a specified time period
Option
The chance that an investment’s will decrease
Risk
A contract issued by an insurance company to pay you regular income
Annuity
The put-and-take account is an emergency account
True
Public corporations are not required to publish annual reports
False
Market risk is caused by business declines or other events
True
Political risk refers to the effect of higher interest rates when you are locked into lower rates
False
An investor does not need to build trust with a financial adviser; it is important only to communicate goals clearly
False
Investments that require more risk usually provide a greater potential returns
True
An investment in real estate (owning your own home) is generally considered relatively safe but fairly illiquid
True
An investment adviser is responsible for your decisions
False
Beginning investments should include only long-range goals such as planning for retirement
False
Forbes and Business Week are examples of financial magazines
True
What is a risk associated with business decline
Market risk
Permanent investments are generally made to provide for…..goals
Long-term
How long are Treasury Bills issued
1year or less
The final level or realm of investing is
Speculation
What are factors in selecting an investment
Liquidity, growth value, and safety
What is a high risk/high return investment
Stock
What is the first step to wise investment
Define your financial goals
Financial advisers should provide you with information about their
Fees
What is a savings plan whereby an individual invests on a regular basis and planned basis
Systematic investment
To find the most detailed data about a corporation, consult
An annual report
