Unit 6

Question 1

Why Invest?

Answer 1

accumulates wealth faster, helps businesses

Question 2

Interest Risk

Answer 2

could go up or down

Question 3

Political Risk

Answer 3

economy changing due to choices made by politicians

Question 4

Market Risk

Answer 4

when the economy goes into recession, caused by the business cycle

Question 5

Non Market Risk

Answer 5

unpredictible events like a hurricane or COVID

Question 6

Company/Industry Risk

Answer 6

company failing or whole industry isn’t doing well

Question 7

Bonds

Answer 7

debt obligations of corporations or governments

Question 8

Options/Futures/Penny Stocks

Answer 8

Options - financial instrutment that gives buyer has the right to buy or sell an underlying assest at a specified price on/before a certain date

Futures - same as Options but with contracts

Penny - stocks that trade at a low price, <$1

Question 9

Rule of 72

Answer 9

72 / percent yield = number of years to double the money

Question 10

Dividends

Answer 10

money paid to stockholders from the corporations profits

Question 11

ROI (return on investment)

Answer 11

ROI = profit/orginal price of stock

Question 12

Stock Index

Answer 12

benchmark that investors use to judge the perfomance of their investments

Question 13

Bull vs Bear Market

Answer 13

Bull - good, rising stock & attitude
Bear - bad, declining stock & attitude

Question 14

Buying on the Margin

Answer 14

borrowing money to buy stock (RISKY)

Question 15

Short Selling

Answer 15

selling stock borrowed from a broker that must be replaced later (RISKY - loss can be infinite)

Question 16

Stock Split

Answer 16

an increase in the number of oustanding shares of a company’s stock

Question 17

Dollar Cost Averaging

Answer 17

technique involing the systematic purchase of an equal amount of the same stock at regular intervals

Question 18

Reinvesting Dividends

Answer 18

using dividends previously earned on the stock to buy more shares

Question 19

Advantages of Mutual Funds

Answer 19

high diversification, convenient, liquid, lower minimum investment, professionals

Question 20

Prospectus

Answer 20

a disclosure document that describes a financial security for potential buyers

Question 21

Net Asset Value

Answer 21

the market price for a share of a mutual fund

Question 22

Reasons to invest in Real Estate

Answer 22

good for inflation, tax benefits, passive income, leverage

Question 23

Leverage

Answer 23

the use of borrowed money to buy securities

Question 24

Renting v Flipping (how they profit)

Answer 24

Flipping - investor buys a property with the intention of selling it for a profit within a short period of time

Renting - being a landlord, getting that consistent cash flow from your tenants

Question 25

Estate

Answer 25

All that a person ownes, debts owed, at the time fo their death

Question 26

Estate Tax

Answer 26

charged on the transfer of very large assets transferred upon death paid by the new owner of the assets

Question 27

Codicil

Answer 27

an addition/supplement that explains, modifies, or revokes a will or part of one

Question 28

Inheritance Tax

Answer 28

a tax on inherited property or money

Question 29

Gift Tax

Answer 29

a tax on assets transferred from one person to another

Question 30

IRA (Individual Retirement Account)

Answer 30

allows ppl to set aside up to a specified amount yearly & delay paying tax on the earnings until they begain withdrawing it at 59.5+

Question 31

401k

Answer 31

employees contribute % of their wage for later profit (the company matches their contributions)

Question 32

403b

Answer 32

operates like a 401k for employees of schools, non profits, and gov units

Question 33

Power of Attorney

Answer 33

legal doc allowing someone to act on your behalf