test 1 Flashcards
- Low risk
- low return
- high liquidity
- usually requires minimum deposit
Savings/Money market
- Low risk
- Love return
- Low liquidity
- Purchased for specific amount of money
- fixed rate of interest
- penalty for withdrawing money early
Certificate of deposit (CD)
- Low average risk
- Average return
- low liquidity
- written promise to repay loans
- Bondholder expects to be repaid in full and to recieve fixed amount of interest
Bonds
- high risk
- potential for high return
- Average liquidity
- Earn money by dividends and capital gains
Stocks
Pool of money used by an investment company to purchase shares of many corporations
mutual funds
- Lowers risk
- potential for high return
- average liquidity
mutual funds
- A focus on preservation
- Short term goals
- Less risk, less potential for return
Saving
- An emphasis on accumulation
- Long term goals
- Greater risk, more potential for return
Investing
The interest payment is computed as a percentage of the original deposit amount
Simple Interest
Interest is when you earn interest on interest
Compound interest
A term often used to imply downside meaning the uncertainty of a return and the potential for financial loss
Risk
The amount of money an investment earns. Expressed as a percent of the original investment and is figured on an annual basis
Rate of return
Even if you do receive the future money on schedule, it will have lost some of its buying power because of increasing prices. Your money buys less
Inflation
The speed and ease at which an investment can be converted to cash
Liquidity
Savings and money and market funds for short term needs
Liquid INvestments
