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Personal Finance > Test 2 > Flashcards

Test 2 Flashcards

1
Q

Why should you save?

A

To provide for future needs (expected and unexpected) and short term goals like vacations, social events and emergencies

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2
Q

Long term goals

A

Home ownership, education, retirement, investment

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3
Q

To stay ahead of inflation and make more money

A

Investment

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4
Q

Smaller loans for current students

A

Education

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5
Q

Down payment, the more you put down, the smaller the payments

A

Home ownership

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6
Q

How quickly you turn savings into cash

A

Liquidity

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7
Q

Money should be placed in an institution that offers the best rate of return

A

Interest earning potential

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8
Q

Selecting a savings plan

A

Liquidity
Safety
Convenience
Interest earning potential

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9
Q

The use of your savings to earn a financial return

A

Personal investing

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10
Q

What is the purpose of investing

A

the overall objective of investing is to earn money with money

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11
Q

Reasons for investing

A 
Emergencies
To supplement earned income
Make a profit
Minimize tax burdens
Provide income for retirement
Stay ahead of inflation
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12
Q

A rise in the general level of prices

A

Inflation

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13
Q

Criteria for choosing an investment

A 
Safety
High liquidity
High return
Tax benefits
Reasonable purchase price 
Growth in value that exceeds inflation rate
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14
Q

Wise investment practices

A 
Define your financial goals
Go slowly (research your investment)
Follow through 
Keep good records 
Seek good investment advice
Keep investment knowledge current
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15
Q

Ownership in a corporation

A

Stock

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16
Q

Debt obligation of corporation

A

Bond

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17
Q

Buy a $50 bond and receive $100 at maturity

A

Government savings bond

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18
Q

Buy shares in a large, professionally managed company who invests in many different securities

A

Mutual funds

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19
Q

Investment options

A

Stocks and bonds
Government savings bond
Mutual funds
Real estate

20
Q

Dividends are fixed, paid first, no voting rights

A

Preferred stock

21
Q

A class of stock in which the owner of the stock shares directly in the success or failure of a business

A

Common

22
Q

The part of the profits of a corporation that each shareholder receives

A

Dividends

23
Q

Stocks that have consistent histories of paying high dividends

A

Income stocks

24
Q

Shares of stock in companies that reinvest their profits into the business so that it can grow and expand

A

Growth

25
Q

A stock that sells for less than $5 a share (highly speculative)

A

Penny

26
Q

Stocks of large well established, and usually profitable businesses

A

Blue chip

27
Q

Stocks that remain stable and pay dividends during an economic decline

A

Defensive

28
Q

Stocks that do well when the economy is stable or growing

A

Cyclical

29
Q

Rising stock prices and a general feelings of optimism

A

Bull market

30
Q

Investors are pessimistic about the overall economy and start to sell

A

Bear market

31
Q

Example of a defensive stock

A

Utilities, drugs, food

32
Q

Example of a cyclical stock

A

Travel industries

33
Q

Stock investing strategies

A

Conservative
Aggressive
Speculative

34
Q

Take limited risks, concentrate on liquidity

A

Conservative

35
Q

Take risks, concentrate on growth stocks

A

Aggressive

36
Q

High probability of a loss but also a chance for large gains

A

Speculative

37
Q

Perks of mutual funds

A

Diversification, professional management, small initial investments

38
Q

Perks of real estate

A

Long term stability and growth in value but can be difficult to sell

39
Q

What is the most illiquid of all investments

A

Real estate

40
Q

Invests in the common stock of smaller companies that have a greater potential to grow

A

Growth funds

41
Q

Invests in the common stock of established companies and industries

A

Income funds

42
Q

Invests in a mixture of stocks

A

Balanced funds

43
Q

Purchases international stocks and bonds as well as US securities

A

Global funds

44
Q

Holds stocks that react the same as the stock markets as a whole do

A

Index funds

45
Q

A special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax free

A

Roth IRA

46
Q

Types of real estate

A

Vacant land
Single family homes
Duplex and apartments
Recreation and retirement property

Personal Finance (4 decks)

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