Final Review Concepts to Know

Question 1

What are the factors of production?

Answer 1

Land, labor capital, and entrepreneurship

Question 2

What is land?

Answer 2

Where the business will be located or what land will be needed to produce the resource

Question 3

What is labor?

Answer 3

How the product will be made and who will make the product

Question 4

What is capital?

Answer 4

The money that it will take to create the product and how much money will be invested

Question 5

What is entrepreneurship?

Answer 5

Where will the idea come from?

Question 6

What are the parts of a successful budget?

Answer 6

Realistic, practical, flexible, accessible

Question 7

What are the levels of investment risk?

Answer 7

1. Financial Security
2. Safety & Income
3. Growth
4. Speculation

Question 8

What kinds of investments do level 1 or financial security include?

Answer 8

Cash, cash equivalents, CDs

Question 9

What kinds of investments do level 2 or safety and income include?

Answer 9

Government bonds, income and utility stocks

Question 10

What kinds of investments do level 3 or growth include?

Answer 10

Common stock and mutual funds

Question 11

What kinds of investments do level 4 or speculation include?

Answer 11

Cryptocurrency, junk bonds, options, commodities

Question 12

What is the lowest risk, lowest reward investment?

Answer 12

Level 1 or Financial Security

Question 13

What is the highest risk, highest reward investment?

Answer 13

Level 4 or Speculation

Question 14

What are the 5 Components of Risk?

Answer 14

1. Inflation
2. Interest
3. Business Failure
4. Financial Market
5. Global Investment

Question 15

Inflation Risk

Answer 15

Risk that your investment will not keep up with inflation

Question 16

Interest Rate Risk

Answer 16

Risk that you will have to sell your bond for less than the original interest rate

Question 17

Business failure risk

Answer 17

Risk that the business you are invested in will fail

Question 18

Financial Market Risk

Answer 18

Risk that the market will decline

Question 19

Global investment risk

Answer 19

Risk that a foreign investment will do differently than the US market

Question 20

What are the 5 credit factors, and what percent weight do they hold?

Answer 20

1. Payment History - 35%
2. Amount Owed - 30%
3. Length of Credit - 15%
4. New Credit - 10%
5. Credit Mix- 10%

Question 21

Which credit factor effects your credit score the most?

Answer 21

Payment History

Question 22

What is a SMART Goal?

Answer 22

Specific
Measurable
Attainable
Relevant
Time Centered

Question 23

What are the personal finance fundamentals?

Answer 23

1. Pay yourself first
2. Live on less than you earn
3. Avoid High Interest Debt

Question 24

What is the 20/80 rule for paying yourself first?

Answer 24

20% goes to your future, such as investments, insurance, and savings. 80% goes to the rest of your standard of living.

Question 25

What does live on less than you earn mean?

Answer 25

Use a budget and do not let your expenses be more than your income

Question 26

What is high interest debt?

Answer 26

Credit cards and any other loan with a high interest rate.

Question 27

What are the 5 risk tolerances in order from lowest risk to highest risk?

Answer 27

1. Conservative
2. Moderately conservative
3. Moderate
4. Moderately Aggressive
5. Aggressive

Question 28

Which risk tolerance has the most level 1 (cash and cash equivalents) and level 2 (bonds) investments?

Answer 28

Conservative

Question 29

What risk tolerance has the most level 3 (stocks) and level 4 (speculative) investments?

Answer 29

Aggressive

Question 30

What portfolio is a blend of all 4 investment types?

Answer 30

Moderate