Savings and Investments Flashcards
(31 cards)
a focus on preservation
saving
an emphasis on accumulation
investing
the interest payment is computed as a percentage of the original deposit amount
simple interest
interest is paid on the original deposit amount as well as on accumulated interest from previous periods
compound interest
the amount of money an investment earns
rate of return
FDIC insures each bank account up to __ dollars
$250,000
term that describes a return on each share of stock the investor holds
dividend
written promise to repay loans is a simple definition describing what type of investment
bond
the ease at which an investment can be converted to cash
liquidity
the gradual rise in prices for goods and services
inflation
profit from the sale of stocks is called __
capital gain
the process of spreading your money over several different types of investments
diversificaiton
a time deposit that requires you to keep your money in the bank for a specific period of time
CD (certificate of deposit)
bonds issued by corporations
corporate bonds
bonds issued by state or local government
municipal bonds
shares in the ownership of a corporation
stocks
mutual funds __(are/ are not) FDIC insured
are not
CD’s __ (are/ are not) FDIC insured
are
the rate of return - the inflation rate =
real rate of return
pool of money used by an investment company to purchase shares of many corporations
mutual fund
characteristics of a savings investment
low risk
low return
high liquidity
usually requires minimum deposit
characteristics of a CD
low risk low return purchased for specific amount of money low liquidity fixed rate of interest for a certain amount of time penalty for withdrawing money early
characteristics of bonds
low-average risk
average return
low liquidity
written promise to repay loans
bondholder expects.. to be repaid in full, receive fixed
amount of interest
characteristics of stocks
high risk
potential for high return
average liquidity
earn money from investment in 2 ways
1. dividends
2. capital gains
