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Questions and Answers
What defines a Certificate of Deposit (CD)?
What defines a Certificate of Deposit (CD)?
- An investment account that allows daily withdrawals without penalties.
- A type of mutual fund that pools money for high-risk stocks.
- A government-issued bond that funds private projects.
- An account that holds a fixed amount of money for a set period, in exchange for interest. (correct)
What is a Municipal Bond primarily used for?
What is a Municipal Bond primarily used for?
- To fund local projects by local governments. (correct)
- To raise capital for corporate expansions.
- To secure loans from private investors at high interest.
- To provide dividends to shareholders annually.
What are dividends?
What are dividends?
- Interest earned from a savings account.
- The capital gained from selling an asset at a higher price.
- Loans taken by corporations from investors.
- Payments made to shareholders from a company's profits. (correct)
What is the primary function of a 401(k)?
What is the primary function of a 401(k)?
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What is meant by Capital Gains?
What is meant by Capital Gains?
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Study Notes
Certificate of Deposit (CD)
- Fixed sum of money held for a specific time period
- Earns interest
Municipal Bond
- Issued by local, county, or state governments
- Funds local projects
- Not taxed at the federal level
Stock
- Represents ownership in a company
- Gives the owner a claim to the company’s assets and earnings
Bond
- Loan from an investor to a borrower (government, corporation, or municipality)
- Repaid with interest after a specified period
Dividends
- Regular payments (typically quarterly) made by a company to shareholders
- Paid from profits or reserves
401(k)
- Retirement savings plan
- Employees contribute and invest a portion of their paycheck tax-free
Capital Gains
- Profit from selling property or an investment
Mutual Fund
- Pool of money from multiple investors
- Used to buy stocks, bonds, and other investments
- Managed by professionals who choose investments
Savings Account
- Holds money not intended for immediate spending
- Earns moderate interest
- Money can be withdrawn at any time
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