Saving & Investing

Question 0

What should you consider when comparing savings accounts at different financial situations?

Answer 0

1- find out regulations & fees on the account

2- compare the interest rates on the savings account

Question 1

Savings account-

Answer 1

An account that earns interest on the amount deposited but the funds can’t be directly accessed. Considered a liquid account because you are able to withdraw money at any time.

Question 2

Rate of return-

Answer 2

The percentage of increase in the value of your savings from earned interest

Question 3

Compounding-

Answer 3

The process of earning interest in interest that you’ve already earned

Question 4

Saving-

Answer 4

The act of accumulating money

Question 5

Investing-

Answer 5

The act of using money to purchase some assets in the hopes of generating more money.

Question 6

What do many people use as part of their financial planning strategy?

Answer 6

Investments

Question 7

Steps to investing-

Answer 7

1- make sure that investing fits into your particular financial plans & goals

2- create a plan & goals for investments

Question 8

What is recommend to have before you begin investing?

Answer 8

an emergency fund, other sources of access to money in case of emergency & adequate life, medical, home & other insurances. Also a balanced budget.

Question 9

What is one of the factors that influence where individuals invest their money?

Answer 9

Relative risk & safety of investment.

Question 10

Speculative investments-

Answer 10

High risk investments with the possibility of high returns in a short period of time.

Question 11

The potential return on any investment should be directly related to the risk the investor assumes.

Answer 11

..

Question 12

Inflation-

Answer 12

Can influence investment choices. An increase in the general levels of prices for goods.

Question 13

If the return on an investment is growing at a greater rate than the inflation rate?

Answer 13

The investment will increase your purchasing power.

Question 14

If the interest rate for other investments rises while yours stays the same?

Answer 14

You are losing out on a greater return on your investment. If the interest rate falls the value of your investment grows.

Question 15

What are some factors that can cause a business to fold?

Answer 15

Bad management, competition, or unsuccessful products.

Question 16

Asset allocation-

Answer 16

When someone invests in a variety of places to reduce the overall risk on investing.

Question 17

Asset classes-

Answer 17

The broad types of investments that have common characteristics.

Question 18

Stock-

Answer 18

A share in the ownership of a company

Question 19

Dividends-

Answer 19

periodic distribution of profits to investors

Question 20

Bonds-

Answer 20

Common long term investment choice. Has fixed dates at which time the borrower promises to repay the bond holder in full. Borrower pays periodic interest which is usually set.

Question 21

Government bonds-

Answer 21

Written my a municipality with the agreement to repay the amount of the bond plus interest on a particular maturity date. Backed by the government & are relatively risk free.

Question 22

T-bills-

Answer 22

sold in increments of $1,000 & have varying maturity dates. Sold at lower amounts with the government repaying $1,000 when the T-bill matures.

Question 23

Treasury bonds-

Answer 23

Sold in $1,000 increments & have a 30 year maturity date.

Question 24

Treasury Inflation Protected Securities-

Answer 24

Sold in $1,000 increments with 5-,10-, or 20- year maturity dates. Principle of this bond raises & falls according to deflation & maturity date. Amount paid is either adjusted it the original depending on which is higher

Question 25

Municipal bonds-

Answer 25

Debt securities issued by state or local governments to pay for ongoing products such as roads, schools & airports. Generally safe investments. Interest earned may be exempt from US federal taxes.

Question 26

What are the two type of securities ?

Answer 26

General obligation bonds & revenue bonds.

Question 27

General obligation bonds-

Answer 27

Backed by the taxing power & credit of the government.

Question 28

Revenue bonds-

Answer 28

Backed by profits from the project for which the bond was issued.

Question 29

Corporate bonds-

Answer 29

Agreements by a company to pay a specific Amount of money at the maturity date. Generally $1,000. Interest is paid on the amount of the bond & maturity dates are between 1-30 years

Question 30

Bond indenture-

Answer 30

Come with corporate bonds. Is a legal document that outlines all of the conditions of the bond.

Question 31

Trustee-

Answer 31

An independent firm or institution. Oversees bond indentures to make sure companies uphold its obligations

Question 32

Preferred stocks-

Answer 32

share characteristics with both common stocks & corporate bonds. Give owners a share in the company but has a fixed dividend every year that provides a consistent flow of income to the owner. Risky investments

Question 33

Mutual funds-

Answer 33

Take investors money & invests it in stocks, bonds, & other investments. Managed by a financial professional who decides which stocks, bonds, & other investments to include in the mutual fund they manage.

Question 34

Direct Stock plans-

Answer 34

Purchased directly from a company. May only be offered to employees or other stock owners.

Question 35

Stock brokers-

Answer 35

professionals act for the investor in buying & selling stock.

Question 36

Individuals have to choose whether to save or invest since it’s not recommended to do both.

Answer 36

FALSE