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Personal Finance > Test 1 > Flashcards

Test 1 Flashcards

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1
Q

Needs

A

Things that are essential to your health and security.

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2
Q

Wants

A

Things that make life more interesting but can be lived without.

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3
Q

Fixed Expense

A

A payment that stays constant

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4
Q

Fixed Expense Examples

A
  • Monthly Subscriptions
  • Car Payments
  • Phone Bills
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5
Q

Variable Expenses

A

Payments that fluctuate in cost, depending on what is bought.

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6
Q

Variable Expense Examples

A
  • Shopping
  • Vacations
  • Dining
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7
Q

What does NYSE stand for?

A

New York Stock Exchange

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8
Q

When was the NYSE created?

A

March 8, 1817

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9
Q

Where is NYSE located?

A

11 Wall Street, Lower Manhattan, New York City, New York

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10
Q

How does one become an owner of a corporation?

A

One must buy a share from that company.

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11
Q

Benefit of stock ownership

A

Money can be made

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12
Q

Risk of stock ownership

A

Money can be lost

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13
Q

How do profits help companies?

A

Profits help make things more affordable for the consumer and provides better working conditions for employees.

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14
Q

How many shares per business day get traded?

A

Over 1 million

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15
Q

What percent of American families own stock?

A

40%

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16
Q

In London, brokers talked investors into investing in what secret device?

A

A secret device that could turn chicken into sheep.

17
Q

How many companies were originally traded at Wall Street?

A

30

18
Q

Describe what is meant by “Bull and Bear” on Wall Street.

A

Bulls were brokers who expected stock prices to rise while bears were traders who anticipated declines.

19
Q

Who was the “Devil of Wall Street”?

A

Jay Gold

20
Q

Short Sale

A

A technique to make money when a stock went down in price.

21
Q

In 1832, what device revolutionized the way we traded stocks?

A

The telegraph

22
Q

What is the term given when you buy stock on credit?

A

Buying on margin

23
Q

What happened in October of 1929?

A

The stock market crashed

24
Q

What percentage did the DOW Jones industrial average go down by?

A

89%

25
Q

What does SEC stand for?

A

Security and Exchange Commissions

26
Q

What theory did Harry Markowitz come up with?

A

Stock Diversification

27
Q

Stock Diversification

A

The idea that investors should buy a wide range of stocks in case one fails.

28
Q

Why was the invention of the computer beneficial to stock exchange?

A

Computers have assisted brokers by ending delays by becoming paperless and increasing security. It also improved the ability to handle large amounts of trade.

29
Q

What was created that was a fast and inexpensive way of trading without the need for face-to-face encounters?

A

NASDAQ Systems

30
Q

Ownership

A

The right to own something and enjoy its benefits.

31
Q

Profit equation

A

Revenue - expenses

32
Q

Risk

A

The chance of losing money

33
Q

Stock

A

A share of ownership in a company

34
Q

What is IPO and what does it stand for?

A

IPO stands for Initial Public Offering. It is the amount per share of a new company.

35
Q

Market Capitalization

A

The amount of shares multiplied by the IPO price

36
Q

Royalty

A

Percentage or dollar amount on each individual product sold

37
Q

What 10 questions should one ask before investing in stock?

A

1) What does the company do?
2) Is the company profitable?
3) What is the company’s earning history and outlook?
4) How richly is the company’s stock valued?
5) Who are the company’s competitors?
6) Who runs the company?
7) How clean is the company’s balance sheet?
8) Company’s 10-K and 10-Q reports?
9) Are there any red flags that call into question the company’s integrity?
10) Is the company’s competitive position sustainable?

Personal Finance (2 decks)

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