Investment concepts

Question 1

Explain Debentures?

Answer 1

a type of debt issued by companies to raise capital - not secured by physical assets or collateral.

Question 2

Describe the term dividends?

Answer 2

● Return on an investment in shares
● Dividends are decided by the company’s board of directors and approved by the shareholders through their voting rights.

Question 3

What is capital gain?

Answer 3

It is returns on property, fixed assets or investments.

(Capital gains tax - payable when you sell an asset that has increased in value since you bought it.)

Question 4

What is simple interest?

Answer 4

● Interest is calculated on the original/principal amount invested.
● The principal amount remains the same over the entire period of investment.
● The interest is kept separate unless it is reinvested.
● Yields less

Question 5

What is compound interest?

Answer 5

● Interest is calculated in every period on original/principal amount plus interest.
● Interest is added to the original/principal amount and interest is earned on interest for each defined period.
● As interest is added to the investment, the capital increases.

Question 6

Explain the difference between compound and simple interest

Answer 6

• With simple interest the principal amount remains the same over the entire period of investment, while with compound interest the principal amount grows with the addition of interest to it.
• with compound interest the Interest is calculated on the higher principal amount and again added to it, while with simple interest the interest is kept separate unless it is reinvested.
  -Simple interest yields less return on investment.
  -Compound interest yields higher return on investment.