Investing

Question 1

The total return on an investment expresses as a percentage of the amount of money invested

Answer 1

Rate of return

Question 2

The danger that money won’t be worth as much in the future as it is today

Answer 2

Inflation risk

Question 3

The current price that a buyer is willing to pay for stock

Answer 3

Market price

Question 4

Reduces risk by spreading investment money among a wide variety of investment tools

Answer 4

Portfolio Diversification

Question 5

The uncertainty regarding the outcome of a situation or event

Answer 5

Risk

Question 6

A mutual fund that was designed to reduce fees by investing in the stocks and bonds that makes up an index

Answer 6

Index Fund

Question 7

A share of ownership in a company

Answer 7

Stock

Question 8

The purchase of assets with the goal of increasing future income

Answer 8

Investing

Question 9

A form of lending to a company or the government (city, state, or federal)

Answer 9

Bond

Question 10

Te specified time in the future when the principal (or initial investment) amount of the bond is repaid to the bondholder

Answer 10

Maturity date

Question 11

The share of profits distributed in cash

Answer 11

Dividend

Question 12

Eliminate, reduce, defer, or adjust the current year tax liability

Answer 12

Tax-sheltered investments

Question 13

The owner of a stock

Answer 13

Stockholder

Question 14

Created when a company combines the funds of many different investors and then invests that money in a diversified portfolio of stock and bonds

Answer 14

Mutual fund

Question 15

An individual’s general approach to investment risk

Answer 15

Investment Philosophy

Question 16

The possibility that an investment will fail to pay the expected return or fail a return at all

Answer 16

Investment risk

Question 17

Allows a person to easily calculate when the future value of an investment will double the principal amount

Answer 17

Rule of 72

Question 18

The rise in the general level of prices

Answer 18

Inflation

Question 19

Have the potential for significant fluctuations in return over a short period of time

Answer 19

Speculative Investments

Question 20

A group of similar stocks and bonds

Answer 20

Index

Question 21

Illustrates the trade-offs between risk and return for a number of saving and investing tools

Answer 21

Financial risk pyramid

Question 22

List three characterisitcs of saving

Answer 22

1. ) more liquid
2. ) low risk
3. ) used for emergencies

Question 23

List three characteristics of investing

Answer 23

1. ) less liquid
2. ) high risk
3. ) helps build wealth

Question 24

Oder from high risk to low risk: Bonds, Stock and real estate, speculative, mutual funds and index funds

Answer 24

Speculative, stock and real estate, mutual funds and index funds, bonds

Question 25

Rule of 72 Equations

Answer 25

72/interest rate = years to double

72/years = interest rate needed for investment to double