Test 2 Flashcards Preview

Personal Finance > Test 2 > Flashcards

Flashcards in Test 2 Deck (46):
1

Why should you save?

To provide for future needs (expected and unexpected) and short term goals like vacations, social events and emergencies

2

Long term goals

Home ownership, education, retirement, investment

3

To stay ahead of inflation and make more money

Investment

4

Smaller loans for current students

Education

5

Down payment, the more you put down, the smaller the payments

Home ownership

6

How quickly you turn savings into cash

Liquidity

7

Money should be placed in an institution that offers the best rate of return

Interest earning potential

8

Selecting a savings plan

Liquidity
Safety
Convenience
Interest earning potential

9

The use of your savings to earn a financial return

Personal investing

10

What is the purpose of investing

the overall objective of investing is to earn money with money

11

Reasons for investing

Emergencies
To supplement earned income
Make a profit
Minimize tax burdens
Provide income for retirement
Stay ahead of inflation

12

A rise in the general level of prices

Inflation

13

Criteria for choosing an investment

Safety
High liquidity
High return
Tax benefits
Reasonable purchase price
Growth in value that exceeds inflation rate

14

Wise investment practices

Define your financial goals
Go slowly (research your investment)
Follow through
Keep good records
Seek good investment advice
Keep investment knowledge current

15

Ownership in a corporation

Stock

16

Debt obligation of corporation

Bond

17

Buy a $50 bond and receive $100 at maturity

Government savings bond

18

Buy shares in a large, professionally managed company who invests in many different securities

Mutual funds

19

Investment options

Stocks and bonds
Government savings bond
Mutual funds
Real estate

20

Dividends are fixed, paid first, no voting rights

Preferred stock

21

A class of stock in which the owner of the stock shares directly in the success or failure of a business

Common

22

The part of the profits of a corporation that each shareholder receives

Dividends

23

Stocks that have consistent histories of paying high dividends

Income stocks

24

Shares of stock in companies that reinvest their profits into the business so that it can grow and expand

Growth

25

A stock that sells for less than $5 a share (highly speculative)

Penny

26

Stocks of large well established, and usually profitable businesses

Blue chip

27

Stocks that remain stable and pay dividends during an economic decline

Defensive

28

Stocks that do well when the economy is stable or growing

Cyclical

29

Rising stock prices and a general feelings of optimism

Bull market

30

Investors are pessimistic about the overall economy and start to sell

Bear market

31

Example of a defensive stock

Utilities, drugs, food

32

Example of a cyclical stock

Travel industries

33

Stock investing strategies

Conservative
Aggressive
Speculative

34

Take limited risks, concentrate on liquidity

Conservative

35

Take risks, concentrate on growth stocks

Aggressive

36

High probability of a loss but also a chance for large gains

Speculative

37

Perks of mutual funds

Diversification, professional management, small initial investments

38

Perks of real estate

Long term stability and growth in value but can be difficult to sell

39

What is the most illiquid of all investments

Real estate

40

Invests in the common stock of smaller companies that have a greater potential to grow

Growth funds

41

Invests in the common stock of established companies and industries

Income funds

42

Invests in a mixture of stocks

Balanced funds

43

Purchases international stocks and bonds as well as US securities

Global funds

44

Holds stocks that react the same as the stock markets as a whole do

Index funds

45

A special retirement account where you pay taxes on money going into your account and then all future withdrawals are tax free

Roth IRA

46

Types of real estate

Vacant land
Single family homes
Duplex and apartments
Recreation and retirement property