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Questions and Answers
Which of the following is NOT a physical characteristic of real estate?
What type of real estate is primarily used for business to generate profit?
Which of the following is considered a hard asset?
Which fund is specifically designed to invest in stocks?
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How do stocks differ from bonds?
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Which of the following is a characteristic of long-term hard assets?
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What is the primary purpose of mutual funds?
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Which type of real estate includes properties like a townhouse or bungalow?
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What does the category of ownership investments primarily rely on?
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Which of the following is an example of lending investment?
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What distinguishes cash equivalents from other types of investments?
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What happens to the premiums paid in an insurance investment plan?
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What is a characteristic of current (demand deposit) accounts?
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What type of investment is characterized by a commitment of funds for a fixed time period?
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Which of the following best describes real estate investments?
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Which investment category generally presents higher volatility and potential returns?
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Study Notes
Investment Basics
- Investment is acquiring assets with the intent to generate income and accumulate wealth.
- Three basic categories of investments: Ownership, Lending, and Cash Equivalents.
Ownership Investments
- Ownership investments are volatile but potentially profitable.
- Examples include stocks, real estate, precious metals, company stakes, business ventures, precious objects, and collectibles.
Lending Investments
- Lending investments generally have lower risk than ownership investments, resulting in modest rewards.
- Examples include lending money, bonds, and savings accounts, which earn interest.
Cash Equivalent Investments
- Cash equivalent investments are easily and quickly convertible to cash.
- Examples include money market accounts and funds, which offer modest interest.
Bank Deposits
- Bank deposits are money placed into a bank.
- Considered a liability owed by the bank to the depositor.
- Two types: Demand deposits (checking accounts) and time deposits (certificates of deposit).
Insurance Investment Plans
- Combine insurance coverage with an investment component.
- A portion of premiums is invested after a certain period.
- Growth in premium value translates to investment growth.
- Provide financial security and growth.
Real Estate
- Land plus permanently attached features (water, trees, buildings, etc.).
- Considered real property, distinct from personal property (vehicles, furniture, etc.).
- Physical characteristics: immobility, indestructibility, and uniqueness.
- Four types: Industrial, Commercial, Land, and Residential.
Hard Assets
- Tangible physical items owned for long-term usage with expected future value.
- Classified as long-term (machinery) and short-term (metals).
- Examples include buildings, equipment, machinery, furniture, vehicles, and gold.
Mutual Funds
- Companies that pool investor money to invest in securities (stocks, bonds, etc.).
- The combined holdings are called a portfolio.
- Investors purchase shares representing ownership and income generated.
- Types include money market funds, bond funds, stock funds, and target date funds.
Stocks and Bonds
- Buying stocks represents purchasing ownership in a company.
- Share prices can rise with company performance and profits.
- Bonds represent loans to bond issuers (companies or government agencies).
- Unlike stocks, bonds do not confer ownership, but they earn interest.
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Description
Test your knowledge on the fundamentals of investments! This quiz covers various categories such as ownership, lending, and cash equivalent investments. Understand the differences and examples of each type to accumulate wealth effectively.
