C10: Basic Saving and Investing

Question 1

money set aside for the future

Answer 1

savings

Question 2

a strategy to earn more on your money than the rate of inflation

Answer 2

investing

Question 3

money set aside for unplanned expenses

Answer 3

emergency fund

Question 4

unplanned or possible events

Answer 4

contingencies

Question 5

a measure of how quickly an asset can be turned into cash

Answer 5

liquidity

Question 6

the accumulation of assets over your lifetime

Answer 6

wealth

Question 7

the ability to meet current and future needs while living comfortably

Answer 7

financial security

Question 8

a period of time, usually in later years, when you are not working and need to meet expenses through other income sources

Answer 8

retirement

Question 9

all that a person owns (assets), minus debts owed, at the time of that person’s death

Answer 9

estate

Question 10

a fund or an organization established and maintained for the purpose of supporting an institution or a cause

Answer 10

foundation

Question 11

a performance measure used to evaluate the efficiency of an investment

Answer 11

return on investment (ROl)

Question 12

the potential for change in the value of an investment

Answer 12

investment risk

Question 13

the chance that the rate of inflation will rise faster than your investment rate of return

Answer 13

inflation risk

Question 14

a debt instrument that is issued by a corporation or government

Answer 14

bond

Question 15

the chance that factors affecting an industry as a whole will affect the value of an investment

Answer 15

industry risk

Question 16

the chance that actions taken by the government will affect the value of an investment

Answer 16

political risk

Question 17

the chance that changes in the business cycle will affect the value of an investment

Answer 17

market risk

Question 18

the chance that events unrelated to market trends will affect the value of an investment

Answer 18

nonmarket risk

Question 19

interest in a publicly held company

Answer 19

stock ownership

Question 20

the chance that activities or events that affect a company will change the value of an investment in that company

Answer 20

company risk

Question 21

a postponement of taxes to be paid

Answer 21

tax deferral

Question 22

an investment that is not subject to taxation

Answer 22

tax-exempt

Question 23

a strategy that involves regularly setting aside cash that can be used to achieve goals

Answer 23

systematic saving

Question 24

a strategy that involves a planned approach to making investments on a regular basis

Answer 24

systematic investing

Question 25

a technique for making investment choices by following the prices of stocks and other investments over time

Answer 25

investment tracking

Question 26

buying and selling stocks based on what the market is expected to do

Answer 26

market timing

Question 27

investing the same amount of money on a regular basis regardless of market conditions

Answer 27

dollar-cost averaging

Question 28

holding a variety of investments for the purpose of reducing overall risk

Answer 28

diversification

Question 29

a collection of investments

Answer 29

portfolio

Question 30

any place where investments are bought and sold

Answer 30

financial market

Question 31

a prolonged period of rising stock prices and general feeling of investor optimism

Answer 31

bull market

Question 32

a period of steadily decreasing stock prices and investor pessimism

Answer 32

bear market