investments exam

A deposit that earns a fixed interest rate for a specified length of time.

Savings/certificate of deposit,

An investment that represents ownership in a company or corporation.

Stocks

7- How are 401ks and IRA's similar? How are they different?

They both are retirement plans 401ks come from your employer IRAs are without employers

4. Rank the following securities from least risky to most risky: commodities, real estate, high-grade preferred stock, money market accounts, speculative stocks, treasury bills.

Treasury bills Money market accounts High grade preferred stock Real estate Speculative stocks commodities

6. What's the purpose of savings? What's the purpose of investing?

You could save money for times when you need it or when you get old. Investing helps with gaining more money and profits.

1. List 3 exchanges we discussed in class.

American stock exchange Began in 1849 - 2nd largest exchange - Its requirements are not as strict as NYSE allowing younger, smaller companies to list

A document detailing the business activity of a company over the previous year, and containing an income statement, cash flow statement, and balance sheet.

Annual report

A security representing a loan of money from a lender to a borrower for a set time period, which pays a fixed rate of interest

Bonds

A person who is licensed to buy and sell stocks, provide investment advice, and collect a commission on each purchase or sale

Broker

Where an investor borrows part of the money needed to invest in a stock from a brokerage firm.

Buying on margin

Unique items that are relatively rare or highly valued.

Collectables

Stock investors are entitled to these payments at the end of fiscal year.

Coupons

Lists the 30 leading industrial blue-chip stocks

DOW index

3. Define diversification and explain why it's beneficial.

Diversification is spreading your assets among different types of investments. This usually helps to reduce the risk of losing all of the investment that you made into one stock.

5. Describe one long term investment strategy.

Diversification to avoid risks while investing.

Buying an equal amount of the same stock at equal intervals.

Dollar cost averaging

This refers to the payments a bond makes periodically before it reaches maturity date.

Face value

8- List 4 ways you can invest in yourself?

Making lists for everyday tasks Invest in a good sleep hygiene Make conservation a habit Learn to cook

Bonds pay their face value at this point of time

Maturity date

Monitors fast moving technology companies

NASDAQ

1. List 3 exchanges we discussed in class.

New York stock exchange - Oldest and largest, began in 1792 - 1,366 seats available - 2,80term-210 companies

A formal written offer to sell securities that sets forth a plan for a proposed business enterprise.

Prospectus

An investor buys pieces of property, such as land or a building, in hopes of generating a profit.

Real estate

1. List 3 exchanges we discussed in class.

Regional stock exchanges Stocks are traded in an over the counter electronic market - 4,000 small companies --Company requirements are not as strict - More volatile because companies are young and new - Average stock price is $11.00

Covers market activity for 500 stocks. More accurate than DOW because it evaluates a greater variety of stock

S&P Index

Means the market is doing poorly and investors are not purchasing stocks or selling stocks already owned

bear market

Means the market is doing well because investors are optimistic about the economy and are purchasing stocks

bull market

An investment that pools money from several investors to buy a particular type of investment, such as stocks.

mutual funds

Where an investor sells shares of stock that they don't own with the intent to buy them back later at a lower price

short selling

2. Describe the risk vs. return relationship.

stocks usually have a high rate of return Higher rate of return = greater risk Stocks provide portfolio diversification