Unit 3
Some corporations sell stocks to extend itself beyond bonds. True False
True
What is the Rule of 72?
a very close estimate for seeing how long it takes for an investment to double. You just divide 72 by the interest rate. If the interest rate is 8% you divide 72/8=9
How is investment risk related to potential gain/loss?
"the higher the risk, the higher the potential return, and the less likely it will achieve the higher return."
You can find this type of account if it is sponsored by employers
401K
Beta
A measure of a stock's volatility compared to changes in the overall stock market.
NASDAQ
A nationwide electronic system that links dealers across the nation so that they can buy and sell securities electronically.
Ticker Symbol
A short abbreviation used to identify a stock. It can have letters or numbers.
NYSE
A stock exchange based in New York City, which is considered the largest equities-based exchange in the world based on total market capitalization of its listed securities.
Will you earn more total interest if your interest is compounded: a. Daily b. Weekly c. Monthly d. Quarterly e. Annually
A. Daily
Which is more liquid: a. Regular savings account b. Certificate of Deposit (CD)
A. regular savings account
What are some factors that determine how much money you will save?
Amount left after bills are paid How important saving is to you Short and long term goals Amount you pay in taxes Anticipated wants and needs Cost of insurance
List the differences between a certificate of deposit and a savings account.
CD - Higher interest rates then savings accounts, interest rate doesn't change during the term of the account, and no fees when you hold account to maturity Savings - unlimited withdrawals, low minimum balance requirements, low or no fees, access to ATMs, compatible with electronic transfers The difference between business savings accounts vs. CDs comes down to interest rates and your ability to withdraw funds
You can open this account without your employers having to set it up...
IRA
Professional management and diversification is an advantage/disadvantage of a mutual fund.
It is an advantage
Stock Index Futures
NASDAQ Standard & Poor's 500 P/E Ratio Dow Jones
Are investments risk-free?
No
common stockholders
Pays a variable dividend Gives voting rights Proxy - written authorization to pass over your voting rights
preferred stock
Pays fix dividend - no matter what Less risky than common, but pay less No voting rights
What do you consider when evaluating a company's stock?
Price-to-earnings ratio (tells you how much investors are paying for a dollar of a company's earnings.)
If you put after tax income on this account, you will not have to pay taxes on the income when you take it out the retirement
Roth 401k
Which of the following savings options is MOST liquid? Certificate of Deposit (CD) Money market account Savings account
Savings Account
Why do banks pay interest on savings accounts?
Savings banks profit from lending money and the interest they collect from loans, in order for them to be profitable they need to pay very little interest on savings accounts.
What is a blue chip stock?
Stock for well-established companies
What is maturity date?
The date on which an investment becomes due for payment.
What are the reasons for using a financial advisor when making investment decisions?
Time Expertise Access to people who work in this field Information Overload So that you can get financial planning on a states and tax matters and they can also sell insurance.
Buying bonds is a way for people to loan money to the government or a corporation. a. True b. False
True
What do you want to know about a financial advisor to make sure they are qualified?
What experience do you have, what are your qualifications, what services do you offer, what is your approach to financial planning, will you be the only person working with me?
Does inflation affect investment strategy? Yes No
Yes
Do stockholders earn dividend payments based on the company's profits?
Yes, It is announced by a company's board of directors and distributed among stockholders.
1. Label each of the following as either short term (a) or long term (b) goals. ____ Buying a home ____ Retirement ____ Buying a new outfit ____ Buying concert tickets ____ Save $1,000 in an emergency fund ____ Save money for a vacation
___b_ Buying a home __b__ Retirement __a__ Buying a new outfit __b__ Buying concert tickets __a__ Save $1,000 in an emergency fund _a___ Save money for a vacation
Dow Jones Average
a market indicator that averages 65 stocks in 3 different categories to determine how the market as a whole is doing
Index
a statistical measure of changes in a representative group of individual data points
Which pays more interest: a. Regular savings account b. Certificate of Deposit (CD)
b. CDs
Will you earn more money in a simple interest account or a compound interest account?
compound interest is better since it allows funds to grow at a faster rate than they would in an account with a simple interest rate.
Shares
equal portions of a corporation's stock
Price Earnings
stock price/earnings per share
What has an effect on stock value?
the company, interest rates, the market
Volume (on a stock chart)
total number of shares that have been traded on the most recent trading day