Terms in this set (23)

  • What is the difference between traditional IRA and Roth IRA?
    Traditional is taxed when money is pulled out of retirement plans. Roth IRA grows tax free
  • What are the three most criteria to consider when investing?
    Liquidity, Risk, Return
  • What is the general relationship between risk and reward?
    Higher the risk, higher the return.
  • Define Capital Gains
    Selling an asset for more than you paid for it.
  • Define Capital Loss
    Selling an asset for less than you paid for it.
  • Understand the relationship between risk and diversification.
    Diversification can help lower the risk because money is invested in a variety of investment tools
  • Define stock
    Shares of ownership in a company
  • Define dividend
    Per stock payments to stockholders from corporation profits
  • Define bond
    Type of debt investment that a company/government issues to investors for a specified period of time.
  • When referring to investments, what does maturity mean?
    The point at which the amount paid for the bond is returned to the bondholder.
  • Define Inflation
    A rise in the general level of prices
  • Explain bull market
    Raising stock prices and investors confidence in their financial future
  • What is compound interest?
    Previous made interest can earn interest
  • How are the prices for stocks and bonds determined?
    By the laws of supply and demand
  • What is the difference in corporate and government/municipal bond?
    Corporate bonds are distributed by private companies whereas government bonds are distributed by states and cities.
  • What is simple interest?
    Interest paid only on principle
  • What information does the 52 week High and Low sections from a stock table provide?
    The highest and lowest prices the stock was sold at during the last 52 weeks.
  • Why does the average investor invest in mutual funds?
    Because they are diverse and professionally managed.
  • Explain the Cardinal Rule of personal finance-(pay yourself first).
    Money should be set aside for saving/ investing purposes, but you start to spend.
  • Define liquidity
    How quickly and easily an asset can be converted into cash.
  • Rank the order of liquidity of the following: real estate, stocks, savings account.
    Most liquid-savings account Moderately liquid-stock Illiquid-real estate
  • What is a certificate of deposit (CD)?
    Depositing money into a CD for a specific length of time.
  • What is the purpose of the Securities and Exchange Commission (SEC)?
    They make sure that the companies issuing stock to the public prices accurate information to investors.