final - chapter 19 Flashcards
What are the 3 kinds of savings accounts?
- savings account
- certificate of deposit (CD’s)
- money market account
an account with a low balance, may deposit and withdraw money as needed
savings account
earn higher interest rate than a regular savings account, usually requires a minimum deposit of $100 to $1000 or more, money must be left on deposit for a specified period
certificate of deposit (CD)
pays a variable interest rate based on various government and corporate securities, do not require long term deposits
money market account
What are the 3 kinds of investment / securities?
- stock investments
- bond investments
- mutual funds
very common way of investing, buy a share in a company, become part owner
stock investments
lending money for use by businesses and governments
bond investments
people buy shares in a fund managed by an investment company, money from many investors is used to invest in a variety of securities, allows investors to spread out their risk among many investments
mutual funds
What is the difference betweeen compound and simple interest?
simple interest is just earned on the amount saved, compound interest is earned on the amount saved plus on interest previously earned
What is the difference between variable and fixed interest?
fixed interest stays the same for the entire time, variable interest changes and can go up or down
if a stock increases in value and is then sold for more than its original cost
capital gain
a stock is sold for less than the original cost
capital loss
What are 3 alternative investments and give examples?
- real estate - ex. housing, farmland, apartment buildings, shopping malls
- commodities - ex. grain, livestock, currency
- collectibles - old coins, works of art, antiques, stamps
the percentage of money earned on your savings or investment over a year
yield
aka rate of return or annual yield
the ease with which an investment can be changed into cash without losing its value
liquidity
What affects stock prices?
- how well a business is doing
- how bad a business is doing
- current economic conditions
- national and global politics
- inflation
- interest rates
- consumer spending
- employment
payments paid to stockholders if a business is profitable
dividends
How is preferred and common stock different?
- preferred stock is less risky, there are no voting rights, has a set rate
- common stock has no stated dividend rate, have voting rights, dividends are paid after preferred, have opportunity to make more money
when a company sells stock itself for the first time, a company’s ‘coming out party’, when a company goes public
Initial Public Offering (IPO)
the OTC market in the US, includes many large companies
NASDAQ
means National Association of Security Dealers Automated Quotations
the price at which a share of stock can be bought and sold in stock market
market value
What is the difference between a bull and bear market?
- bull market - is a good thing, there is a prolonged period of time when prices are rising in financial market faster than their historical average, associated with increasing investor confidence
- bear market - is a long period of time when prices are falling in financial market, accompanied by widespread pessinism (people don’t feel good about market)
indicators of stock values that are commonly reported on websites, tv, radio and newspapers
stock index
stock index that includes 30 of the largest US companies
Dow Jones Industrial Average
