Ch. 19 Study Guide: Intro to Business 2

What is a condominium?

An individually owned housing unit in an apartment-like complex.

What are mutual funds?

An investment fund set up and managed by companies that receive money from many investors.

What is a mortgage?

A legal document giving the lender a claim against the property if the principal, interest, or both are not paid as agreed.

What is a stockbroker?

A licensed specialist in the buying and selling of stocks and bonds.

What is a preferred stock?

A stock that has priority over common stock in the payment of dividends. Dividends are limited at a set rate, less risky than common stock and no voting rights within the corporation.

What is a common stock?

A stock that represents general ownership in a corporation and a right to share in its profits.No stated dividend rate, voting rights, dividends after preferred stockholders, may receive more dividends than preferred stockholders.

What is a money market account?

An account that pays a variable interest rate based on various government and corporate securities. There is a minimum balance requirement, but earns higher interest than savings account (but less than CD).

What is a corporate bond?

Bonds issued by corporations (lending money to corporations).

What is a US savings account?

Bonds issued by federal government.

What is a municipal bond?

Bonds issued by local and state governments.

What are the advantages to renting?

Freed from the work and expenses of property maintenance, easier to move.

What are the economic factors that can cause stock prices to go up and down?

Inflation, interest rates, consumer spending, employment

What is compound interest?

Interest computed on the amount saved plus the interest previously earned.

What are bond investments?

Lending money for use by businesses and government.

How often is interest paid on a bond?

Paid periodically (usually twice a year).

High risk has what?

Potential for high return.

What is the difference between preferred and common stock?

Preferred stock has no voting privileges but common stock does. Preferred stock has their stock holders get paid first. Common stock pays their dividend after preferred stock holders. Common stocks are more risky. Preferred stock is not too risky. Common stock has no stated rate. Preferred stock has a set dividend rate.

What are the three alternative investments?

Real estate, commodities, collectibles

What is a savings account?

Requires low or zero minimum balance. You can deposit and withdraw money as needed. Very safe, but low interest paid.

What is a CD and what does it stand for?

Stands for Certificate of Deposit. Higher interest rate than savings account. Requires a minimum deposit. Must be specified for a period of time. Penalties are assessed if withdraw money early.

What is liquidity?

The ease with which an investment can be changed into cash without losing its value.

What is interest?

The money you receive for letting others use your money.

What is market value?

The price at which a share of stock can be bought and sold in the stock market.

What is savings?

The storage of money for future use.

Which type of bond is the safest bond?

US savings bond

What is investing?

Using your savings to earn more money.

How long is a mortgage usually?

Usually 15-30 years.