Chapter 8

Question 1

Share

Answer 1

Piece of ownership in a company, mutual fund, or other investment

Question 2

Risk-Return Ratio

Answer 2

A relationship of substantial reward compared to the amount of risk taken

Question 3

IRA

Answer 3

Tax-deferred arrangement for individuals with earned income; Individual Retirement Arrangement

Question 4

Investing

Answer 4

The process of setting money aside to increase wealth over time for long term financial goals such as retirement

Question 5

Tax-Favored Dollars

Answer 5

Money that is invested, either tax-deferred or tax free, within a retirement plan

Question 6

Stocks

Answer 6

Securities that represent part ownership of equity in a corporation

Question 7

Risk

Answer 7

Degree of uncertainty of return on an asset; in business, the likelihood of loss or reduced profit

Question 8

Rule of 72

Answer 8

Formula to calculate time it will take to double money

1) Divide 72 by interest rate
2) Answer is the number of years it will take

Question 9

Liquidity

Answer 9

Quality of an asset that permits it to be converted quickly into cash w/o loss of value; the availability of money

Question 10

Portfolio

Answer 10

A list of your investments

Question 11

Investment

Answer 11

An account or arrangement in which a person puts his/her money for long term growth

Question 12

Mutual Fund

Answer 12

Pool of money managed by an investment company and invested into multiple companies

Question 13

Mutual Funds:
25% \_\_\_\_\_\_\_\_\_\_\_\_\_
25% \_\_\_\_\_\_\_\_\_\_\_\_\_
25% \_\_\_\_\_\_\_\_\_\_\_\_\_
25% \_\_\_\_\_\_\_\_\_\_\_\_\_

Answer 13

Growth
Growth and Income
International
Aggressive Growth

Question 14

The _______ liquid an investment, the _______ the return

Answer 14

More/less

Less/more

Question 15

Diversification

Answer 15

The practice of dividing the money a person invests between several different types of investments to lower risk

Question 16

401(k)

Answer 16

A retirement savings plan offered by a corporation to its employees; the employee contributes money from his/her gross pay, and the money grows tax deferred