Buisness chapter 19
Earning interest on previously earned interest results in
Faster growth of savings
The TISA requires that
Financial instuatuions give consumers information to compare savings accounts
Individuals, businesses, and governments borrow money from ____, whereas others borrow the savings of others to pay for homes
Financial instution
These actions create
Jobs and expand economic activity
Real estate is
Land and anything that is attached to it
A mortgage is ____ and are _____
Legal document giving lender a claim against the property if the principal interest or both are not paid Long term loans that have monthly payments higher than rent
When an investment is sold for ___ than its originals cost a ___ is the result
Less Capital loss
Some costs of home ownership are
Property taxes \ Interest payments - add to cost of home Property insurance - value of house affects insurance Maintence - upkeeping your home
Assessed value
the amount that your local government determines your property to be worth for tax purposes
Equity
Difference between price at which you can sell your house snd amount owed
Treasury note or t note have mature for
1 to 10 years
financial planning experts encourage people to deposit
10 percent of their income into a savings account or other investment each month
This savings instrustment usually requires a minimum deposit of ______ . You need to leave the money on deposit for a specific period form a ____.. ___ may be assessed if the money is withdrawn early
100-1000 Few days to several years Pentality, loss of interest
Today's savings accounts at most institutions are insure up to ___ by the government . This insurance is a promise that your
250000 Money will be available when needed
Treasury bonds or thongs involve maturity of up to
30 years
Series EE savings bonds range from _____. A series EE bond is bought at _____.
50-10,000 Half its face value
Brokers work through a stock exchange which is
A business that accomodates the buying and selling of securities ; best known is in New York City ; more than 100 in world
Interest rates on mortgages may be set for the term of the loan, this mortgage is called ____. Interest rates increases or decrease depending on economic conditions which is why lenders offer
A fixed rate mortgage An adjustable rate mortgage; which can be raised or lowered from time to time depending upon the current interest rate being charged by lenders
The price of a stock should be considered. Many look at the price earnings ratio which is the relationship between
A stocks selling price and its earnings per share t
The federal, state and local government issue a
A variety of bonds
Online services provided by the broker allow investor to access __. These transactions are
Account information as well as buy and sell securities Less expensive and more conviented
Common stockholders only receive dividends ____ preferred stockholders are paid, however if the profit of the compan is large, they
After May receive higher dividends than preferred
Main types of mutual funds
Aggressive growth stock funds seek quick growth but also have higher risk Income funds specialize in stocks that pay regular didvidnets International funds invest in stock companiess around the world Sector funds buy stocks of companies in the same industry such as health care Bond funds specialize in corporate bonds Balanced funds invest in both stock snd bonds
Commodity investors buy and sell future contracts ___. Future contracrs involve the buying and selling of
Agreemtn to buy or sell an amount of a commodity at a specificed price in the future Currencies and finanical instrucutrme
Commonly obtained collectibles are
Autographs, letters of famous people, movie posters and toys
______ offer a choice of savings plans
Banks, credit unions and other finanical institutions
Lending money for use by businesses and governments is used by
Bond incestmenrs
To raise money for current operations or future expansions most governments and coroporation sell _____. A bond is a ___
Bonds Certificate representing a promise to pay a definite amount of money at a state interest rate on a specificed due dat (maturity date).
A -____ allows you to earn a higher interest rate than a regular savings account
Certificate of deposit
Commodities are bought and sold on exchange similar to ___. ONe of the best known commodities exchange is
Chicago board of trade
Preferred stock has priority over __in the payment of dividends. The dividends are usually limited to ___ and investing in preferred stock is ____ but they generally ___ have voting rights
Common stock A set rate Less risky Have no
When you purchase a bond you are lending funds to a
Company or government agency to use for their business activities
____ is computed on the amount saved plus the interest previously earne
Compound interest
Bonds issued by corporations are called
Corporate bonds
Interest can be compounded ___. The more
Daily, monthly, quarterly, semiannually or annually. Frrurnt the compound the greater the growth of savings
When this money is spent
Demand for good and services increases, resulting in more jobs and creates more spending by worker s
These accounts ____ require long term deposits but do require ____. The earnings are typically ___ than regular savings accounts but ____. Than long term certificate
Do not Large minimum balance Higher Lower
High rates of interest ___ mean a loss will occur , but instead that investors believe the situation involves a
Do not Higher risk
The market value ____ change rapidly. If business is doin well the market value is ____, if a business has a poor record the market value usually goes
Does Likely to go up Goes down
The ____incldues 30 of the us largest us companies. Another stock index is _____ which is based on stock values of 500 major companies
Dow Jones industrial Avery Standard and poor
Other information that needs to be considered is the yield of a stock especially if your goal is to
Earn a good return from your investment
Market value can be affected by
Economic conditions as well as national and global politica
When savings are invested and used the ___ benefits
Economy
If you have 500 dollars deposit in the bank and you need it you go there and withdraw it, however if you own a piece of land that was 500 the land is a safe investment meaning you are gonna
Find it difficult to sell it right away nad may have to sell for less
Governments issue bonds to raise money for
Funding public services
Appreciation
Generla increase of property that occurs over time
Agricultural producers sell crops in advance of harvest at what they believe is good price, farmer wil then known in advance how much each crop is. Future contract buyer hopes the price of the crop ____ when harvested so that they can earn a profit.
Go up
Commodities include ___ and are considered ___ investments
Grain livestockl and precious metals Speculative/ high risk
Real estate commodities and collectibles carry
Grater risk than savings and securities choices so carefully review your situation and options
Usually higher yields and ___ risk go together, investments you make with the ____ are the safest . When you invest money with indicuals or businesses it usually earns
Greater Government Higher interest than that paid by thr govnemrnet because there is less safety
Before investing in stock ask yourself
Has this company been profitable Has the company's managers made good decisions Dies the company have potential growth in the coming years Does the company have an usually large amount of debt How does the company compare within others
Savings is also important in order to
Have money available for emergencies
The P/E ratio gives you an indication of whether the stock is priced
High or low in relation to its earnings per shar e
Governments may borrow for ___. A economy would be significantly ___
Highways schools or other services. Weakened without savings and investments
Owning a mobile home provides the opportunity for ____; an advantage of owning a mobile home is ____
Home ownership Having a place to call yogurt own
Every saver or investor has one of two major financial goals: ___> people who want income for current living expenses desire ___.
Income or growth Current income
A stock purchase is a common way of investing. If a stock ___ in value and is sold for ___ than its original coast, a ____ results
Increases More Capital gain
Many economics conditions affect stock prices such as
Inflation - higher prices result in lower spending, reducing company profits Interest rates- as cost of money changes company profits will increase and decrease Consumer spending - profits are directly affected by buying habits Employment- people obtain and lose jobs the amount of money you have for spending will affect company profits
Municipal bonds have an advantage over bonds issued by companies, as usually ___ earned on bonds is exempt from ____. In order to avoid taxes people buy ___ even though interest rates are _____ as high as those offered on corporate bonds
Interest Taxes Municipal bonds Not
Before it can pay any dividends a corporation must pay bondoholders the rate of ___. If ther is not enough money no dividends will be handed out or if they want to save for future growth . If coroporation goes out of business stockholders may get
Interest promised to them Little to nothing back from investment
I-bond pays an
Interest rate that changes with inflation
After building up some savings, most people want to earn more; _____ means using your savings to earn more money
Investing
Mutual fund is an ______. These funds are managed by
Investment fund set up and managed by a company that receives money from money investors. A professional who uses investors money to buy and sell stocks or bonds.
Investing online has some disadvantages such as inexperience in making ____ or buying and selling stocks too
Investment trading decisions Quickly
Cash may be needed quickly to pay bills this is referred to as
Liquidity
Not all investment need
Liquidity
In contrast _____ is the goal for those who desire ___. Investors who desire long term growth choose investments that they hope will
Long term growth were Financial security in the future. Increase in value over time
A savings plans with ____ is a regular savings account. Usually you may ____ as needed and these accounts pay ____ while keeping money safe
Low Deposit and withdraw Interest
When you own a condo, the ____ are normally taken care of with a small service fee
Maintenance and yard work
Each bond has a face value called the ___. This is the amount being borrowed by the corporation issuing the bond, for either
Maturity value. 1,000 and 25,000 and higher amounts
When you buy a bond you are lending ___, you become a creditor of the organization.
Money to the organcaition selling the bond
Bonds issued by local and state govnements are called
Municipal bonds
Mutual fund investors own shares of ___ and the value of each share is based on the ___. This amount is called
Mutual funds Total value of all investments made by mutual fund company Net asset value
A discount broker places orders and ___. They charge
Offers limited research and other services . Lower commissions than full service and investor who do their own research save money by using this
Yield is the percent of money earned
On your Saving investment over a year. Rate of return or annual yield
Businesses borrow funds to ____. Building a new factory, replacing old equipment or selling a new product are
Operate or expand their operations Common reasons for business borrowing
A part of dividends received from fund investments is used to pay ___ and the major portion of earnings is distributed to the
Operating expenses of fund Mutual fund shareholders or reinvested in the fund
Currencies are traded on future markets, the price of currency is affecred by a country's economic ________. Financial instruments expect the price to ____
Outlook and current interest rate Increase in the future so that they can sell them to others at a profit
Common stock represents general ___ it has ___ stated dividend rate. Common stockholders are invited to the annual meeting of the corporation as they are ____, and they are entitle to one __ per share of stock owne d
Ownership in a coroporation and a right to share in its profits. Part owners Vote
Advantage of collectibles is
Personal pleasure of buying, storing and arranging what's collected
Most investors will not accept high risk unless the ___ is greater however a low rate of return does not guartnee
Potential yield Safety
A good savings plan should earn a
Reasonable return.
Most people start by ____ as you are freed from much of the
Renting Work and expense of property maintence as well as making it easier for you to move when needed. (Take some responsibility but does not call apartment your own)
Mutual funds allow investors to spread out there
Risk among many investments
Most municipal bonds are considered _____ than corporate bonds
Safer investments
___ is the storage of money for future use
Savings
In addition to putting money aside as savings, you should make those _____. Interest is money you receive
Savings work for you For letting other use your money
The over the counter market is a network where
Securities transactions occur using telephones and computers rather than on an exchange
A full service broker provides information about
Securities you may want to buy. Work for brokerage houses with research staffs
Many people purchase their own home for the sense of ____, __~ or for ____
Security and stability Rental income It's value will increase
The market value of a stock is the price at which a _____ and it indicates
Share of stock can be bought and sold in the stock market The current value of a share of stock
Instead of buying individual stocks and bonds people can buy
Shares in a mutual fund managed by an investment company
Treasury bills or bill involve
Short term borrowing with maturity form 91 to one years
The price investors are willing to pay for a bond depending upon the . If it's stature rate is Lower than interest rates you will buy the bond __, if it's higher than then interest rates on similar bonds the seller will
Stated interest rate For les than its face value Want to revive more than its face value
Another measurement of investment value is a ___. These are commonly reports on ___
Stock index Websites, television radio and in newspapers
The prices at which stocks are being bought and sold are available through
Stock market listings in online reports
A licensed specialist in the buying and selling of stocks and bonds.is a __. These people state the price at which they are ___. For their service brokers charge a fee called
Stockbroker Willing to sell their shares Commission
When you buy shares in a corporation you become a __. If that business is profitable they ma pay out part of the profits in cash to the stockholders called ___. This opportunity to earn a high rate of return attracts ___
Stockholder Dividends People o invest in stocks .
Some benefits of homeownership
Tax benefits - reduced income tax results when interest paid on mortgage is included as deductible expense Increased equity -increased rapidly in last few years of mortgage Pride of ownership - feel accomplished
Earnings from most savings and investments are __ which reduces ___, some have tax exempt earning smeaning
Taxes Rate of return You do not have to pay taxes on that income, these are attractive bc the tax free yield may be higher than a taxable investment
If someone owed you 100 plus 10 interest and at end of year has nothing you lost
The 100 you loaned and the 10 you should have earned which is why return is i,profane
When choosing stock you need to learn about____. Several online sources and printed reports are available such as
The company (net worth, debt, sales revenu, profits and dividend history) Marketwatch.com , google financie, value line and yahoo finance
Money used for a down payment reduces the amount of ___ with the mortgage
The loan
Old coins, works of art, and other items are often bought with that hope that
Their value will increase
Homeowners use a real estate agent who is a person that is ___ they help you decide
Trained and licensed to help with the buying and selling of real estate. What you want in a house and will arrange for buyers to view your home, as well as help set the selling price and promotes that the house is for sale
For people with small amounts of money ____ are the safest investment
US saving bonds
The possiblity of a rage buyer of collectiables makng a large profit is ___ ,only rare Coins tend to be items on which they make profit, so make sure you ___ the market
Uncertain Study
The ____ oversees the financial market and it requires that
Us securities and exchange commission All companies that issue publicly traded securities to electronically file detailed reports
A money market accounts pays a
Variable ntoerest rate based on various government and corporate securities.
Money from many investors is used to invest in
Varty of securities
Lawyers can help your real estate agent by assuring ____, An appraiser is someone trained to _____. They are important as wlel
Your propert has no claims against it which will avoid legal troubles Estimate the value of property and who can give an official report on the value (construction, location, price are considered)