Final Review Concepts to Know Flashcards
What are the factors of production?
Land, labor capital, and entrepreneurship
What is land?
Where the business will be located or what land will be needed to produce the resource
What is labor?
How the product will be made and who will make the product
What is capital?
The money that it will take to create the product and how much money will be invested
What is entrepreneurship?
Where will the idea come from?
What are the parts of a successful budget?
Realistic, practical, flexible, accessible
What are the levels of investment risk?
- Financial Security
- Safety & Income
- Growth
- Speculation
What kinds of investments do level 1 or financial security include?
Cash, cash equivalents, CDs
What kinds of investments do level 2 or safety and income include?
Government bonds, income and utility stocks
What kinds of investments do level 3 or growth include?
Common stock and mutual funds
What kinds of investments do level 4 or speculation include?
Cryptocurrency, junk bonds, options, commodities
What is the lowest risk, lowest reward investment?
Level 1 or Financial Security
What is the highest risk, highest reward investment?
Level 4 or Speculation
What are the 5 Components of Risk?
- Inflation
- Interest
- Business Failure
- Financial Market
- Global Investment
Inflation Risk
Risk that your investment will not keep up with inflation
Interest Rate Risk
Risk that you will have to sell your bond for less than the original interest rate
Business failure risk
Risk that the business you are invested in will fail
Financial Market Risk
Risk that the market will decline
Global investment risk
Risk that a foreign investment will do differently than the US market
What are the 5 credit factors, and what percent weight do they hold?
- Payment History - 35%
- Amount Owed - 30%
- Length of Credit - 15%
- New Credit - 10%
- Credit Mix- 10%
Which credit factor effects your credit score the most?
Payment History
What is a SMART Goal?
Specific Measurable Attainable Relevant Time Centered
What are the personal finance fundamentals?
- Pay yourself first
- Live on less than you earn
- Avoid High Interest Debt
What is the 20/80 rule for paying yourself first?
20% goes to your future, such as investments, insurance, and savings. 80% goes to the rest of your standard of living.
What does live on less than you earn mean?
Use a budget and do not let your expenses be more than your income
What is high interest debt?
Credit cards and any other loan with a high interest rate.
What are the 5 risk tolerances in order from lowest risk to highest risk?
- Conservative
- Moderately conservative
- Moderate
- Moderately Aggressive
- Aggressive
Which risk tolerance has the most level 1 (cash and cash equivalents) and level 2 (bonds) investments?
Conservative
What risk tolerance has the most level 3 (stocks) and level 4 (speculative) investments?
Aggressive
What portfolio is a blend of all 4 investment types?
Moderate
