What are the 3 kinds of savings accounts?
- savings account
- certificate of deposit (CD's)
- money market account
an account with a low balance, may deposit and withdraw money as needed
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?
- stock investments
- bond investments
- mutual funds
very common way of investing, buy a share in a company, become part owner
lending money for use by businesses and governments
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
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
a stock is sold for less than the original cost
What are 3 alternative investments and give examples?
- real estate - ex. housing, farmland, apartment buildings, shopping malls
- commodities - ex. grain, livestock, currency
- 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
- interest rates
- consumer spending
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
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 that includes 30 of the largest US companies
Dow Jones Industrial Average
stock index which is based on stock values of 500 major companies
owns a smaller company or companies
oversees the financial markets
US Securities and Exchange Commission (SEC)
What are the 6 main types of mutual funds?
- Aggressive growth stock funds - seek quick growth, but also have higher risk
- Income funds - specialize in stocks that pay regular dividends
- International funds - invest in stock of companies from around the world
- Sector funds - buy stocks of companies in the same industry such as health care, energy or telecommunications
- Bond funds - specialize in corporate bonds
- 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?