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Flashcards in final - chapter 19 Deck (35):
1

What are the 3 kinds of savings accounts?

  1. savings account
  2. certificate of deposit (CD's)
  3. money market account

2

an account with a low balance, may deposit and withdraw money as needed

savings account

3

earn higher interest rate than a regular savings account, usually requires a minimum deposit of $100 to $1000 or more, money must be left on deposit for a specified period

certificate of deposit (CD)

4

pays a variable interest rate based on various government and corporate securities, do not require long term deposits

money market account

5

What are the 3 kinds of investment / securities?

  1. stock investments
  2. bond investments
  3. mutual funds

6

very common way of investing, buy a share in a company, become part owner

stock investments

7

lending money for use by businesses and governments

bond investments

8

people buy shares in a fund managed by an investment company, money from many investors is used to invest in a variety of securities, allows investors to spread out their risk among many investments

mutual funds

9

What is the difference betweeen compound and simple interest?

simple interest is just earned on the amount saved, compound interest is earned on the amount saved plus on interest previously earned

10

What is the difference between variable and fixed interest?

fixed interest stays the same for the entire time, variable interest changes and can go up or down

11

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

capital gain

12

a stock is sold for less than the original cost

capital loss

13

What are 3 alternative investments and give examples?

  1. real estate - ex. housing, farmland, apartment buildings, shopping malls
  2. commodities - ex. grain, livestock, currency
  3. collectibles - old coins, works of art, antiques, stamps

14

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

yield

aka rate of return or annual yield

15

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

liquidity

16

What affects stock prices?

  • how well a business is doing
  • how bad a business is doing
  • current economic conditions
  • national and global politics
  • inflation
  • interest rates
  • consumer spending
  • employment

17

payments paid to stockholders if a business is profitable

dividends

18

How is preferred and common stock different?

  • preferred stock is less risky, there are no voting rights, has a set rate
  • common stock has no stated dividend rate, have voting rights, dividends are paid after preferred, have opportunity to make more money

19

when a company sells stock itself for the first time, a company's 'coming out party', when a company goes public

Initial Public Offering (IPO)

20

the OTC market in the US, includes many large companies

NASDAQ

means National Association of Security Dealers Automated Quotations

21

the price at which a share of stock can be bought and sold in stock market

market value

22

What is the difference between a bull and bear market?

  • bull market - is a good thing, there is a prolonged period of time when prices are rising in financial market faster than their historical average, associated with increasing investor confidence
  • bear market - is a long period of time when prices are falling in financial market, accompanied by widespread pessinism (people don't feel good about market)

23

indicators of stock values that are commonly reported on websites, tv, radio and newspapers

stock index

24

stock index that includes 30 of the largest US companies

Dow Jones Industrial Average

25

stock index which is based on stock values of 500 major companies

S&P 500

26

owns a smaller company or companies

parent company

27

oversees the financial markets

US Securities and Exchange Commission (SEC)

28

What are the 6 main types of mutual funds?

  1. Aggressive growth stock funds - seek quick growth, but also have higher risk
  2. Income funds - specialize in stocks that pay regular dividends
  3. International funds - invest in stock of companies from around the world
  4. Sector funds - buy stocks of companies in the same industry such as health care, energy or telecommunications
  5. Bond funds - specialize in corporate bonds
  6. Balanced funds - invest in both stock and bonds

29

Why do governments and corporation sell bonds?

to raise money for current operations or future expansions

30

What are 3 types of government bonds?

  • municipal bonds
  • US savings bonds
  • Treasure bills

31

someone trained to estimate the value of property and who can give an official report on the value

appraiser

32

What are some benefits of home ownership?

  • tax benefits
  • increased equity - can sell house for more than you owe and make money
  • pride of ownership - feel proud that you own your own home

33

the difference between the price at which you could currently sell your house and the amount owed on the mortgage

equity

34

What are some of the costs of home ownership?

  • property taxes
  • interest payments
  • property insurance
  • maintenance - keeping property in good condition, is about 2% of property's value

35

What are some factors that affect the value of a home?

  • location
  • quality of schools
  • maintenance of the property and home
  • home features - updated kitchen, remodeled bathrooms, finished basement, etc