ch. 2- investment

Question 1

Define Aggressive Growth Stock Mutual Fund.

Answer 1

mutual find that seeks to provide maximum long-term capital growth from stocks of smaller companies

Question 2

What is another name for the Aggressive Growth Stock Mutual Fund?

Answer 2

small-cap fund

Question 3

Define Annuity.

Answer 3

savings account with an insurance company, don’t have to pay tax on them

Question 4

Define Bond.

Answer 4

an issuer such as a corporation or government agency

Question 5

Define C.D

Answer 5

Certificate of Deposit. savings account with a higher interest rate because of a longer savings commitment

Question 6

Define Commodity.

Answer 6

a food, metal, or fixed physical substance that investors buy usually through future contracts

Question 7

Define Diversification.

Answer 7

to spread around one’s investment dollars

Question 8

Define Dividend.

Answer 8

distribution of a portion of a company’s earnings

Question 9

Define Fixed Annuity.

Answer 9

type of annuity that guarantees a certain rate of return

Question 10

Define Futures.

Answer 10

a term used to designate all contracts covering the sale of commodities

Question 11

Define Investments.

Answer 11

arrangement one would put money in for long-term growth

Question 12

Define Growth Stock Mutual Fund.

Answer 12

fund that buys stock in a medium-sized company

Question 13

What is another word for Growth Stock Mutual Fund?

Answer 13

mid-cap fund

Question 14

Define Large-Cap Funds.

Answer 14

funds compromised of large companies

Question 15

Define Liquidity.

Answer 15

the availability of getting money out without loss of value; more liquidity, less return

Question 16

Define mid-cap fund.

Answer 16

mutual fund containing a group of medium-sized companies that are growing

Question 17

Define Money Market.

Answer 17

mutual fund that seeks to maintain a stable share price & to earn current income by investing in interest-bearing instruments with short term maturities

Question 18

Define mutual fund.

Answer 18

a pool of money invested in different investments

Question 19

Define portfolio

Answer 19

a list of your investments

Question 20

Define Rental Real Estate.

Answer 20

buying real estate to rent out as an investment

Question 21

Define Risk.

Answer 21

degree of uncertainty of return on an asset

Question 22

Define International Stock Mutual Fund.

Answer 22

mutual fund that contains international countries

Question 23

Define Risk Return Ratio.

Answer 23

relationship of substantial reward in comparison to the amount of risk taken

Question 24

Define Savings Account.

Answer 24

accounts that allow regular deposits and withdrawals

Question 25

Define Share.

Answer 25

price of ownership in a company or mutual fund

Question 26

Define Single Stocks

Answer 26

buying stock in only one company

Question 27

Define Small-Cap Fund

Answer 27

mutual fund that invests in companies whose market is less than $1 billion

Question 28

Define Speculative.

Answer 28

risky investments that present the possibility of large profits but also a higher than average possibility of loss

Question 29

Define Track Record.

Answer 29

the past history of something

Question 30

With investments, how far back should you look on the track record?

Answer 30

5-10 years

Question 31

Define Variable Annuity.

Answer 31

annuity covered by the annuity covering making it tax-deferrable

Question 32

What is the KISS method of investing?

Answer 32

Keep It Simple, Stupid

Question 33

How should you never invest?

Answer 33

- just for tax savings | - using borrowed money

Question 34

What is diversification's relationship with risk?

Answer 34

it lowers risk

Question 35

Throughout stock market's history, what percentage of 5 year periods make money? 10 year periods?

Answer 35

97%; 100%

Question 36

Saving is.... years..... Investment is.... years.....

Answer 36

Saving is 5 years or less. Investing is 5 years or more

Question 37

What is the relationship with liquidity and return?

Answer 37

when there is more liquidity, there is usually less return

Question 38

What is a bear market? Bull market?

Answer 38

stock market prices are down; bull- stock market prices are up

Question 39

What is the risk in money market mutual fund?

Answer 39

low risk

Question 40

Single stock has what kind of risk?

Answer 40

extremely high risk

Question 41

For single stocks, when does your return come?

Answer 41

as the company increases in value or pays you some of the profits

Question 42

What are dividends?

Answer 42

the profits of a company

Question 43

For bonds, when does your return come?

Answer 43

in the fluctuation in price and the interest rate paid

Question 44

Do many do well with single bond purchases?

Answer 44

no

Question 45

Who manages mutual funds?

Answer 45

portfolio managers

Question 46

For mutual funds, when does your return come?

Answer 46

as the value of the fund is increased

Question 47

Long-term investments properly diversified include the following mutual funds:

Answer 47

1) International 2) Aggressive Growth (Small-cap) 3) Growth (Mid-Cap) 4) Growth & Income (Large Cap)

Question 48

What is the least liquid consumer investment?

Answer 48

real estate

Question 49

What is usually the interest rate for fixed annuities? Good or bad investment?

Answer 49

5%, bad

Question 50

List 4 horrible investments.

Answer 50

fold, commodities/future, day trading, viaticals

Question 51

What are viaticals?

Answer 51

pay to be a beneficiary of a dying person

Question 52

Building wealth takes time. It's not like a _________; its like a ________________

Answer 52

microwave; crock pot

Question 53

What is the best place for an emergency fund?

Answer 53

C.D or money market

Question 54

How do you go about finding the right person to help you invest?

Answer 54

find someone with a teacher's heart

Question 55

What are some investments that don't give you a high rate of return?

Answer 55

fixed annuities & single stocks

Question 56

How are single stocks and mutual funds different? Which is the better investment?

Answer 56

Mutual Funds are investors pooling their money together and it is usually low risk. Single stocks are usually bought by one person & has high risk. Mutual funds are better