19.1 Saving and Investment Planning Flashcards Preview

Intro to Business > 19.1 Saving and Investment Planning > Flashcards

Flashcards in 19.1 Saving and Investment Planning Deck (53):
1

  • people buy stocks and bonds managed by an investment company
  • money from many investors are used to invest in a variety of securities
  • allow investors spread out their risk among many investments

mutual funds

2

What are the safest investments?

investments made with the federal government

3

this type of investment invests in businesses/entrepreneurs to receive a portion of the profits

 

  • bonds
  • venture capitalist
  • commodities
  • collectibles

venture capitalist

4

a good savings plan or investment should ____ a reasonable return

a good savings plan or investment should earn a reasonable return (person should make money from it)

5

interest that is computed on the amount saved plus the interest previously earned

compound interest

6

if a stock increases in value and is then sold for more than its original cost

capital gain

7

goal for those who desire financial security in the future

long term growth

8

earnings from most savings and investments are ____

taxed

9

  • allows you to earn a higher interest rate than regular savings account
  • usually requires a minimum deposit of $100 to $1000 or more
  • must leave money on deposit for a certain time period
  • penalties charged if money is withdrawn early

certificate of deposit / CD

10

  • grain, livestock, precious metals, currency, financial instruments
  • investors purchase these in hopes of higher market prices in the future
  • very risky

commodities

11

people who want income for current living expenses

current income

12

assurance that the money you have invested will be returned to you

safety

13

A person who desires high income from an investment would be most concerned with:

  • safety
  • return
  • liquidity
  • risk

return

14

_____ interest is when your account earns interest on top of interest

 

  • variable
  • simple
  • compound
  • none of these

compound

15

Which of the following is investing for current income?

  • retired person who needs to pay for living expenses
  • business manager planning for retirement
  • student putting away money for college
  • family that wants to buy a vacation home

retired person who needs to pay for living expenses

16

money you receive for letting others use your money

interest

17

savings accounts at most financial institutions are insured up to $250,000 by the _____

federal government

18

______ interest is when the rate changes

variable interest is when the rate changes

19

On which type of interest would you earn more?

simple interest or compound interest

compound interest

20

  • old coins, works of art, antique furniture, other rare items
  • bought with the hopes that their value will increase

collectibles

21

The most liquid investment listed here is:

  • rare coins
  • real estate
  • a savings account
  • a house

savings account

22

which investment is considered low risk (more than one)

  • certificate of deposit
  • stock
  • commodities
  • money market account
  • mutual fund
  • savings account
  • venture capitalism

  • certificate of deposit (CD)
  • money market account
  • savings account

23

this type of investment deals with grain, livestock and precious metals

  • stocks
  • collectibles
  • commodities
  • corporate bonds

commodities

24

Why do people invest in real estate?

  • people purchase their own home for the sense of security and stability (they pay the mortgage every month and when they sell it can make all that money back - hopefully)
  • people purchase property for rental income
  • some buy vacant property in hopes that its value will increase
  • examples - housing, farmland, apartment buildings and shopping malls

25

When you invest money with individuals or businesses, it usually earns _____ interest than that paid by the government because there is ____ safety.

when you invest money with individuals or businesses, it usually earns higher interest than that paid by the government because there is less safety (there is a chance you won't get money back)

26

the percentage of money earned on your savings or investment over a year

yield

aka - rate of return & annual yield

27

a _____ is made up of a group of stocks

 

  • bond fund
  • securities fund
  • commodity
  • mutual fund

mutual fund

28

What are the 2 major financial goals of every saver and investor?

income or growth

29

What are some choices for your saving and investing dollars?

  • savings plans:  savings account, certificate of deposit, money market account
  • securities:  stock investments, bond investments, mutual funds
  • alternative investments:  real estate, commodities, collectibles

30

What are two reasons people save?

  1. some save for years for a down payment to buy a home
  2. some save for emergencies

31

______ is using your savings to earn even more money

investing is using your savings to earn even more money

32

true or false

investments such as commodities, bonds and stocks are FDIC insured

false

only savings plans (savings acct, CD's, money market account) are insured

33

  • pays a variable interest rate based on government and corporate securities
  • do not require long term deposits
  • have a large minimum balance requirement
  • earn higher interest than regular savings account but less than CD's

money market account

34

A ____ company is a larger company that owns a smaller company

a parent company is a larger company that owns a smaller company

35

means you don't have to pay taxes on that income

tax exempt investments

36

using your savings to earn more money

investing

37

Higher yields = ____ risk of loss

higher yields equal greater risk of loss

38

  • a savings plan with a low balance
  • can deposit and withdraw money as needed
  • pay interest

savings account

39

  • lending money for use by businesses and governments
  • common investment
  • company or government uses money invested for their business activities

bond investments

40

when an investment is sold for less than its original cost

capital loss

41

What are 4 factors to consider when selecting an investment?

  1. safety & risk - how likely are you to get your money back?
  2. potential return - how much money are you going to earn?
  3. liquidity - how quickly can it be changed to cash?
  4. taxes - do you have to pay taxes on money earned?

42

How does the economy benefit when savings are invested and used?

  • People borrow to pay for homes, cars, college - when this money is spent the demand for goods and services increases so more jobs are created and more people have money to spend
  • Businesses borrow to operate or expand their business - this creates jobs and expands economic activity so more people have money to spend
  • Governments borrow for highways, schools and other public services - creates more jobs

43

When you buy a ___ of ____ , you become part owner of a company

when you buy a share of stock, you become part owner of a company

44

investments that can be turned into money quickly are called ____

liquid

45

the percentage rateequal to the total amount of interest that a $100 deposit would earn based on a 365 day period

annual percentage yield (APY)

46

requires that financial institutions give consumers information to compare savings accounts

The Truth in Savings Act (TISA)

47

____ represents debt

bonds

48

What helps eliminate confusion caused by different interest calculation methods?

annual percentage yield (APY)

49

_____ is done after building up some savings

investing is done after building up some savings

50

What are stock investments?

  • when you buy a share of stock
  • stock purchase made directly or indirectly through mutual funds
  • very common way of investing
  • results in capital gain or capital loss

51

the ease with which an investment can be changed into cash without losing its value

liquidity

52

the storage of money for future use

saving

53

Which is more liquid?

$5000 on deposit in bank or owning a piece of land that you bought for $5000

  • the money in the bank
  • if you need that money right away you just go to bank and withdraw it
  • even though the land is a safe investment it might be difficult to sell the land right away and get the cash needed