Business Finance Module 1: Investment Types

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Questions and Answers

What does the term 'Annual Percentage Rate' reflect?

The different tag lines used by banks

The types of bank deposit accounts

The maximum deposit insurance coverage

The amount of interest earned or charged (correct)

What does 'Equal Principal Repayments' provide?

Long-term investment opportunities

Unlimited withdrawal access to savings accounts

Additional credit facilities for businesses

Accrued interest on the unpaid balance, plus an equal amount of the principal (correct)

What best describes the tag lines mentioned in the text?

They are used by top banks in the Philippines to encourage investment during difficult times (correct)

They are slogans used for promoting credit cards

They describe the benefits of mutual funds

They represent the types of investments offered by financial institutions

What is the maximum deposit insurance coverage for all bank deposits mentioned in the text?

Ph 500,000 per depositor or per financial institution Signup and view all the answers

Which type of account offers.25% interest annually on the deposit?

Savings Accounts Signup and view all the answers

In which account can funds be easily accessible for withdrawal anywhere and anytime?

Savings Accounts Signup and view all the answers

For whom are Checking accounts suitable?

Small and big businessmen, companies, and institutions like schools and hospitals Signup and view all the answers

What is the main purpose of issuing checks instead of withdrawing large amounts in cash?

To make business transactions safer than carrying big amounts of cash for payment Signup and view all the answers

'Tangible assets' include which of the following?

Real Estate and Hard Assets Signup and view all the answers

'Investment' can be described as:

An asset acquired for generating future income or appreciation Signup and view all the answers

Which of the following best defines amortization?

The reduction of debt over time by paying the same amount each period Signup and view all the answers

What does a fixed interest rate offer borrowers?

A fixed interest percentage to pay back over an agreed period of the loan Signup and view all the answers

What are intangible assets?

Assets that are not physical in nature Signup and view all the answers

What is the principal amount in relation to a loan?

The initial size of a loan and can also refer to a loan balance that is still outstanding Signup and view all the answers

What is meant by negative amortization?

An increase in the principal balance of loan caused by a failure to cover the interest due on a certain loan Signup and view all the answers

What is an amortized loan?

A loan to be repaid by a series of regular installments of principal and interest that are equal or nearly equal Signup and view all the answers

What is the main focus of the learning competency (essential competencies) mentioned in the text?

Describing the six key areas of personal financial planning Signup and view all the answers

What is the purpose of the 'Let’s Understand (Study the Concept)' section mentioned in the text?

To discuss the advantages and disadvantages of investment Signup and view all the answers

What is the significance of the internet link provided in the text?

To show examples of people who went broke due to poor financial planning Signup and view all the answers

What is the key takeaway from the story about top celebrities who went broke, as per the text?

Overspending practices and lack of appropriate investments can lead to bankruptcy Signup and view all the answers

What is the expected outcome after going through Module No. 3, according to the text?

Describing personal financial planning processes Signup and view all the answers

What is the primary factor that personal finance depends on?

Cost of living and personal goals Signup and view all the answers

According to the text, what is the foundational principle of personal finance?

The Best Protection Is Knowledge Signup and view all the answers

What does 'Risk and Return Go Hand in Hand' imply in the context of personal finance?

Higher risk invariably results in higher returns Signup and view all the answers

What is the significance of 'The Importance of Liquidity' in personal finance?

It highlights the importance of readily convertible assets Signup and view all the answers

What does 'Protection against Major Catastrophes' involve in personal finance?

Insurance coverage for natural calamities Signup and view all the answers

What does 'Waste Not, Want Not- Smart Spending Matters' emphasize in personal finance?

Prioritizing lower need items in a budget Signup and view all the answers

How does 'Nothing Happens Without a Plan' relate to personal finance?

It emphasizes the need for goal-based financial planning Signup and view all the answers

Study Notes

Financial Terminology and Concepts

Annual Percentage Rate (APR) reflects the total yearly cost of borrowing expressed as a percentage, including interest and fees.
Equal Principal Repayments provide a consistent reduction of the principal balance over time, resulting in decreasing interest payments on a loan.
Taglines are used to succinctly capture the essence of financial products, highlighting their main features and benefits.

Banking and Account Features

Maximum deposit insurance coverage for all bank deposits is typically up to $250,000, protecting consumers in case of bank failure.
A specific account type offers 0.25% interest annually on the deposit, encouraging savings with a minimal yield.
Funds in a savings account can be easily accessible for withdrawal anywhere and anytime, catering to consumer convenience.
Checking accounts are suitable for individuals who require frequent access to their funds for everyday transactions.

Payment Methods and Asset Types

The main purpose of issuing checks instead of withdrawing large amounts in cash is to provide a safer, more secure way to conduct transactions without carrying physical cash.
Tangible assets include physical items like real estate, vehicles, and equipment that hold intrinsic value.
Investment can be described as the allocation of resources, usually money, with the expectation of generating income or profit.

Loan Mechanics

Amortization best defines the process of gradually reducing a loan balance through scheduled payments over time.
A fixed interest rate offers borrowers predictability in their repayment amounts, as the rate remains constant throughout the loan term.
Intangible assets refer to non-physical resources such as patents, trademarks, and goodwill that can hold significant value.
The principal amount in relation to a loan is the original sum borrowed before any interest or fees are applied.
Negative amortization occurs when loan payments are insufficient to cover the interest owed, causing the principal balance to increase.
An amortized loan is characterized by regular payments that cover both principal and interest until the loan is fully paid off.

Learning and Financial Competency

The main focus of the learning competency involves developing essential financial knowledge and practical skills essential for sound financial decision-making.
The ‘Let’s Understand (Study the Concept)’ section aims to clarify complex financial concepts, enhancing comprehension and application.
The internet link provided holds significance as it directs readers to additional resources or tools that reinforce the learning material.
A key takeaway from the story about top celebrities who went broke highlights the importance of sound financial management and avoiding excessive spending.

Personal Finance Principles

The expected outcome after completing Module No. 3 is an improved understanding of personal finance principles and skills.
Personal finance primarily depends on budgeting effectively and managing resources wisely to achieve financial stability.
The foundational principle of personal finance revolves around living within one’s means and planning for future expenses.
"Risk and Return Go Hand in Hand" implies that higher potential returns on investments often come with increased risks.
The Importance of Liquidity in personal finance signifies the need for accessible cash or assets to meet immediate financial obligations.
Protection against Major Catastrophes involves insurance planning and savings strategies to safeguard against unforeseen financial emergencies.
"Waste Not, Want Not - Smart Spending Matters” emphasizes the need for conscious spending habits to optimize financial resources.
"Nothing Happens Without a Plan" relates to personal finance by underscoring the necessity of setting clear financial goals and strategies to achieve them.

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Description

Test your knowledge on different types of investments, their basic features, and how to differentiate between them. This quiz covers the learning competency of comparing and contrasting various investment options.