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What are the 3 kinds of savings accounts?

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


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

savings account


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)


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

money market account


What are the 3 kinds of investment / securities?

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


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

stock investments


lending money for use by businesses and governments

bond investments


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


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


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


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

capital gain


a stock is sold for less than the original cost

capital loss


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


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


aka rate of return or annual yield


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



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


payments paid to stockholders if a business is profitable



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


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)


the OTC market in the US, includes many large companies


means National Association of Security Dealers Automated Quotations


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

market value


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)


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

stock index


stock index that includes 30 of the largest US companies

Dow Jones Industrial Average


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

S&P 500


owns a smaller company or companies

parent company


oversees the financial markets

US Securities and Exchange Commission (SEC)


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


Why do governments and corporation sell bonds?

to raise money for current operations or future expansions


What are 3 types of government bonds?

  • municipal bonds
  • US savings bonds
  • Treasure bills


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



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


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



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


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