What is a Mutual Fund?/Whats is risk? 1

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intermediate

5-15 years

idirect nvestments

Direct Investment • Owner holds legal title to property

P/E

P/E: Short for price/earnings ratio. The price of a share of stock divided by the company's earnings per share for the last year.

primary

Primary: securities are sold from company to an investor

Exchange Traded Funds

collections of stocks and bonds that are traded on exchanges but are traded more like individual stocks than like mutual funds

maturity date

date when a bond will be repaid.

long term

more than 15 years

stock

ownership in a company; equity • If you own stock you are a shareholder

retirenment plans

social security, 401K, roth 401K, 401, self account, sep plan,

common stock

voting rights and dividends

Many savings programs are protected by the Federal Government against loss. Which of the following is not? A. A bond issued by one of the 50 States B. A certificate of deposit at the bank C. A U. S. Savings Bond D. A U. S. Treasury Bond

A

mutual funds

A group of investments held in common by many individual investors.

dividend

Div: Short for dividend. A dividend is when a public company decides to pay a portion of its profits to stockholders. For each share of stock owned, a shareholder should receive $1.76 from the company's annual profits.

secondary

Secondary: securities are sold from investor to investor.

yield

Yld%: The yield, or rate of return, on a stockholder's investment. It is figured by dividing the annual dividend by the current price of the stock.

Which one of the following types of investments has the highest risk and the highest potential rate of return? A. Stocks B. Money market mutual fund C. Government bonds D. Savings bonds

a

hich of these is NOT a major INDEX of how well the stock market is doing? A. DOW B. NASDAQ C. S&P 500 D. KOA

a

What type of broker not only helps clients buy or sell investments, but they offer research and investment advice as well. A. Discount broker B. Full-service broker C. Online broker D. Investment advisor

b

When evaluating investment alternatives you should remember: A. It is better to find a company that can invest for you. B. It is wise to diversify. C. To put all your eggs in one basket. D. Banks and credit unions are the best choice.

b

A company that issues bonds is actually: A. Selling small pieces of ownership in its business. B. Lending money C. Borrowing money D. Introducing a new product

c

Matthew and Alicia just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following is likely to have the highest growth over the next 18 years? A. Savings bond B. Savings account C. Stocks D. Checking account

c

Spreading your money among different types of savings and investments is called: A. Diversification B. Compounding C. Time value of money D. Short selling

d

Which investment has low risk, a low rate of return, and is long-term? A. Mutual funds B. Real estate C. Stocks D. Bonds

d

Which of these does NOT have a physical location, but is only an electronic exchange? A. regional exchanges B. AMEX C. NYSE D. NASDAQ

d

Which statement below is true about mutual funds? A. Mutual funds offer guaranteed returns. B. Consumers can choose which stock to include in your mutual funds. C. All mutual funds buy stocks. D. Mutual funds are convenient and professionally managed.

d

Closed-End Funds

fixed number of shares tht are issued by an investment company when first organized.

compound interest

is interest that generated not only from the money you put into an account but also from the interest you make on that money.

interest rate

is the percentage of interest you make or pay on principal.

short term

less than 5 years

preferred stock holder

recieve cash dividends before common stock holder; limited voting rights. "middle investment" safer than a common stock but not as safe as bonds.

stock certificate

represents ownership.

how do you make money?

sell of the stock

principal

sum of moneyyou put into a account or the amount of money minus interst you owe on a debt so if you open an account with 500 the pricipal amount is 500

net income

the amount of a paycheck that a person can actually spend, gross income less any payroll deductions.

indirect investment

trustee is appointed to hold lefal title to property in behalf of investors

Open-End Funds

unlimited number of shares that are issued and redeemed by an investment company at the investors' request.

capital gain:

when stock is sold you gain a profit

capital loss:

when stock is sold you lose money

dividends

• Dividends: company's profits that are paid to shareholders (usually paid quarterly) • Companies do not have to issue dividends

face value

• Face Value: dollar amount that the bondholder will receive at maturity.

IPO

• IPO: Initial Public Offering; company sells stock to general publics for the first time. (Considered a high-risk investment.)

government bonds

• Issued by federal, state or local government • Lower interest rate than corporate bonds, but less risky. • Three types: • T-bills - discounted securities • Treasury Notes and Bonds - longer maturity date • US Government Savings Bonds - Series EE and Series I.

bond

• Loan to a corporation or government. • (Company's written pledge to repay bondholder with interest.)

municipal bonds

• Security issued by a state or local government • Not as safe as Federal Bonds


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