Quantitative reasoning chapter 1
Understand the difference between Traditional IRAs and ROTH IRAs
IRA: can have @ 18, max- $19500, pre-tax dollars, pay taxes later on stock growth Roth IRA: after tax dollars, grows tax free, max $6000 yearly, salaries up to $140k
What is a broker?
Agent that acts on behalf of others, earning a commission (E-trade, Robinhood, Schwab)
Understand which investment options yields are highest.
stocks
What is the best investment option for long term savings?
stocks
What is bitcoin?
type of crypto currency with no central bank
Where and when was the first stock exchange opened?
1602, Amsterdam
Understand the difference between 401(k)s and 403(b)s
401(k): retirement fund through private employer thats professionally managed 403(b): retirement fund through public employer thats professionally managed
The stock market's annual rate of return?
7%
What is investment diversification?
Distributing funds among different types of investments to minimize overall risk. EX: Mutual Funds
What is an ETF?
Exchange traded fund, a basket of dozens of stocks and or bonds thats diversified and publicly traded
What was the impact of the stock market crash of 1929?
Led to Great Depression, unemployment rose, many people lost money
Will bought 50 shares of Home Depot stock at $290 per share. At the end of one year, Home Depot was priced at $325 per share. No dividends were paid. What was Jack's one year return?
ROI: change in value / starting value 325-290 = 35/290 x 100 ROI: 12.07
Who created bitcoin?
Satoshi Nakamoto
Which type of bond is the safest?
U.S. Treasury Bond
What is a dividend?
a distribution of profits by a corporation to its shareholders
What is a mutual fund?
professionally managed fund that trades in diversified holdings
When should you start saving for retirement?
asap
What is a municipal bond?
bonds issued by local and state governments
What is a maturity date?
date you receive money from bond
Why did bitcoin have a bad reputation at first?
everybody thought it was to sell illegal drugs
What is the Rule of 72?
formula used to estimate number of years required to double the invested money at a given annual rate of return 72/interest rate
What is a fixed rate?
interest rate on the note remains the same through
What is a bond?
lending money to an entity and you get paid back over certain period of time
Are stock investments insured? By who?
no, nobody
What is a P/E Ratio?
price per share/earnings per share
How does a bond work?
when you buy a bond you are lending money to an entity
Do riskier investments tend to yield more growth in the long run?
yes, younger you are, riskier your investments should be
What are some of the benefits of bitcoin?
you can send it to different countries w/o fees super secure, low corruption chance, less chance of getting hacked
Owning a stock in a company means you own what?
you own a part/share of the company
How do interest rates affect bond prices?
•If rates increase, prices fall •If rates decrease, prices rise Bonds: boring, safe investments stocks: high risk, high rewards