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Consumer Ed Honors > Stock Markets and stuff > Flashcards

Stock Markets and stuff Flashcards

1
Q

What does compound interest tell us about when you should start sving and investing

A

Early

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2
Q

Why is it important to invest versus just save?

A

Investing will give you a lot more money than just saving

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3
Q

Explain how making regular payments to an investment account is a good way to save.

A

Factor in a certain amount of money from each paycheck that you want to save. Put away a certain amount each paycheck. So it is like you never had the money. If it comes out automatically, psychological factor. Compound interest.

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4
Q

Traditional savings account

A
  • Low interest/no interest

- No fees

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5
Q

Certificates of deposits

A
  • High interest
  • Fixed interest rate
  • Earn it year after year
  • Locked in time
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6
Q

Money market accounts

A
  • Similar to sacings account
  • Higher interest rate
  • 1-2% interest
  • Higher minimum balance
  • Limited number of withdrawls
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7
Q

What is the difference between simple and compound interest and which generates higher yield

A

Simple: original amount x years
Compound: original amount x (1+ (rate/number))^rate x time
Compound generates higher yield

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8
Q

What is diversification

A

Not putting all your eggs in one basket. Split what you want to invest into multiple stocks instead of just one, so if one goes down, you aren’t in trouble. Mixture of stocks, commodities, bonds.

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9
Q

What is insider trading?

A

Trading on the stock exchange using non-public/classified information.

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10
Q

What does the term liquid mean relative to investments?

A

Any investment that can be easily converted into cash without having a significant impact on its value. Examples of liquid investments are cash, money market funds, and shares of publicly held companies that actively trade on an established stock exchange.

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11
Q

Which level of the pyramid offers the most potential

reward?

A

Summit

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12
Q

If you are nearing the age of retirement you investments

should mostly be in which level of the pyramid?

A

Base

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13
Q

. When you are younger it can be a good idea to allocate
a larger percentage of your assets as higher risk, but a
good rule of thumb is that the majority of your assets
should be located in which part of the pyramid?

A

Base

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14
Q

e. P/E Ratio

A

Is calculated by dividing the current market price of the stock by its earning per share (EPS). It shows the sum of money you are ready to pay for each rupee worth of the earnings of the company

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15
Q

. EPS

A

Earnings per share. the portion of a company’s profit allocated to each share of common stock

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16
Q

f. EPS

A

Earnings per share. the portion of a company’s profit allocated to each share of common stock

17
Q

. Dividend and Yield

A

Forward dividend and yield: an estimation of a year’s dividend expressed as a percentage of the current stock price. …
-The forward dividend yield is calculated by dividing a year’s worth of future dividend payments by a stock’s current share price.

18
Q

h. Volume and Average Volume

A

Volume:commonly reported as the number of shares that changed hands during a given daY
Average volume:the total amount traded in that period, divided by the length of the period.

19
Q

i. Market Capitalization

A

Referer to the total value of all a company’s shares of stock. It is calculated by multiplying the price of a stock by its total number of outstanding shares. For example, a company with 20 million shares selling at $50 a share would have a market cap of $1 billion.

20
Q
  1. What is the difference between a 401(k) and a 403(b)? How are they similar?
A

401(k)- offered by for-profit organizations. Non government. Employee contribution. Employer matching
401(b)- nonprofit, religious, school, government organizations, voluntary. Both are saving for retirement

21
Q

What is an IRA? What is the difference between traditional and Roth IRA?

A

Individual retirement account.Traditional IRA contributions are tax-deductible on both state and federal tax returns for the year you make the contribution; withdrawals in retirement are taxed at ordinary income tax rates.
- Roth IRAs provide no tax break for contributions, but earnings and withdrawals are generally tax-free.

22
Q

What is the rule of 72? What would it be for 6% interest? 8% interest? 10% interest?

A

Rough estimate of how long it would take to double an
investment
• FIXED ANNUAL INTEREST RATE
Divide 72 by the rate. Equals number of YEARS.

23
Q

What is a bond? What are different bond options available?

A

A fixed income instrument that represents a loan made by an investor to a borrower
(typically corporate or governmental)

24
Q

What is a brokerage firm?

A

Connect buyers and sellers, facilitating the transaction due to their reach.
- Facilitate the transactions.
• Facilitate transactions

25
Q

. What is the difference between realized capital gains and unrealized capital gains?

A

Unrealized- potential profits before you actual sell. Stocks.
Realized- when you actual sell your stocks, you get actual money.

26
Q

What is NASDAQ

A

A global electronic marketplace for buying and selling securities, as well as the benchmark index for U.S. technology stocks.

27
Q

What is the NYSE?

A

Is a stock exchange located in New York City that is considered the largest equities-based exchange in the world, based on the total market capitalization of its listed securities.

28
Q

NYSE vs NASDAQ

A
  • NYSE has blue chip companies

- NASDAQ leads in new companies

29
Q

Blue chip company

A

The mature companies in the stock market that represent the stalwarts of industry—safe, stable, profitable, and long-lasting companies that represent relatively safe, low volatility investments

30
Q

Which stock exchange typically consists of new technology companies?

A

Nasdaq

31
Q

What is a mutual fund?

A

An investment program funded by shareholders that trades in diversified holdings and is professionally managed.

32
Q

Why is investing in mutual funds a good idea?

A

It is diversified, so it more safe.

33
Q

Dollar Cost Averaging

A

Every time period you invest a certain amount of money each month.

34
Q

. Average Down

A

When the price of a stock goes down, buy more shares, so the average cost per share goes up, so it is easier to break even

35
Q

Constant Dollar Investing

A

Maintain certain range value in your portfolio. If your many goes up $2000 take out $2000

36
Q

What is the Time Value of Money? Why is it important related to investing early?

A

The same amount of money is worth more today than it is
in the future
• A dollar is worth more today than it is tomorrow.
Inflation means your money saved will decrease in value as time continues

Consumer Ed Honors (5 decks)

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