Consumer and Personal Finance Chapter 16

The chance that inflation will rise faster than the return on your investments is called _____________________ risk

Interest-rate

The use of long-term savings to earn a financial reward is called

Investing

All of the following are wise investment practices except

Make your decisions quickly to take advantage of the market

Which of the following would be considered the lowest risk investment?

A corporate bond

The type of risk is caused by the business cycle

Market risk

Which of the following is typically the first stage of investing

A put-and-take account

A(n) ____________________ is the pooling of money from many investors to buy a large selection of securities

Mutual fund

The right, but not the obligation, to buy or sells a commodity or stock for the specified price within a specified time period is called a(n)

Option

___________________ stocks are low priced stocks of small companies that have no track record

Penny

A collection of investments is called a(n) ___________________

Portfolio

_________________ investing happens when you make bold and high-risk investment choices

Speculative

Maximization of return in the next five to ten years is the goal of which investment strategy

Strategic Investing

The daily newspaper that provides detailed coverage of the business and financial world is

The Wall Street Journal

(T or F) A common mistake is keeping temporary investments too long and not reevaluating them regularly to determine how well they are performing

True

(T or F) A discount broker usually provides little or no investment advice to a client

True

(T or F) Investments usually allow your net worth to grow at a faster rate than general price levels

True

(T or F) Mutual funds are the fastest growing segment of the American financial services industry

True

(T or F) The great risk you are willing to take, the greater the potential return

True

(T or F) When you invest in stocks and bonds, you are helping businesses make and sell new products and services

True

(T or F) With inflation, it takes more money to buy the same goods and services

True

(T or F) With most types of brokerage accounts, you can manage your account online

True

(T or F) Your initial investing should be conservative with low risk.

True

Professional investment planners who are trained to give the investment advice based on your goals, age, lifestyle and other factors are called

Certified Financial Planners

_____________ risk is associated with owning the stock of just one organization

Company

The spreading of risk among many types of investment is called ____________________

Diversification

The Rule of 72 is a technique for estimating the number of years required to ________________________ your money at a given rate of return

Double

(T or F) Collectibles are considered one of the safest and most liquid investments available

False

(T or F) It is illegal to use information in a company's annual report for investment purposes

False

(T or F) Most financial advisers recommend that you keep three to six weeks' net pay in your put-and-take account

False

(T or F) Non-market risk is entirely predictable and controllable

False

(T or F) The maturity date of a bond is the date on which the investor must pay the purchase price of the bond

False

(T or F) Typically, odds are good that you will make a profit in speculative investment

False

The general rise of prices is called _______________

Inflation

You have $3,000 and want to double it in five years. What rate of return must your investment earn to achieve your goal?

14.4%

A skateboard costs $72.80 this year. Suppose it cost just $70 last year. What is the inflation rate on the skateboard?

4%

You are earning 8 percent on your investment. How many years will it take for you to double your money?

9 years

Bob purchased a rare baseball card for $500. Six months later, Terri bought the card for 7 percent more than Bob paid for it. How much did Terri pay for the card?

$535

According to the Rule of 72, if an investment of $5,000 is yielding an average of 6 percent, it will take _____ years for that investment to be worth $10,000

12

A(n) ____________________ is a summary of a corporation's financial results for the year and its prospects for the future

Annual report