Personal Finance Chapter 13 Flashcards

poorly diversified

stocks, bonds, and mutual funds

accumulation of excess funds by intentionally spending less than you earn

<p>taking of some money you are saving and putting it to work so that it can earn you more money</p> Signup and view all the answers

<p>securities (stocks, bonds, and mutual funds)</p> Signup and view all the answers

<p>shares of ownership of a corporation</p> Signup and view all the answers

<p>represent loans to companies and governments</p> Signup and view all the answers

<p>portfolio</p> Signup and view all the answers

<p>financial risk - the possibility that the investment will fail to pay any return to the investor</p> Signup and view all the answers

<p>positive total return - the income an investment generates from a combination of current income and capital gains</p> Signup and view all the answers

<p>money received while you own an investment which is received on a regular basis as interest, rent, or dividends</p> Signup and view all the answers

<p>is the return earned for lending money</p> Signup and view all the answers

<p>payment received for allowing someone to use your real estate property</p> Signup and view all the answers

<p>a portion of a company's earnings that the firm pays out to its shareholders</p> Signup and view all the answers

<p>you sell an investment that has increased in value</p> Signup and view all the answers

<p>there is a decrease in the paper value of an initial investment</p> Signup and view all the answers

<p>the total return on an investment which is expressed as a percentage of its price</p> Signup and view all the answers

<p>means there is no potential for gain, only possibility of loss</p> Signup and view all the answers

<p>involves potential gain as well as potential loss</p> Signup and view all the answers

<p>represents the possibility that the yield on an investment will deviate from its expected return</p> Signup and view all the answers

<p>is a short-term treasury bill which is a risk-free investment with very low return (0.25 and 0.35)</p> Signup and view all the answers

<p>risk premium - the difference between a riskier investment's expected return and the totally safe return on the T-bill</p> Signup and view all the answers

<p>willingness to weather changes in the values of your investments</p> Signup and view all the answers

<p>general approach to tolerate risk for investments (conservative, moderate or aggressive)</p> Signup and view all the answers

<p>you accept very little risk and are generally awarded with low rates of return</p> Signup and view all the answers

<p>you do not want to lose any of the money you have invested, meaning you are risk averse</p> Signup and view all the answers

<p>seeking capital gain slowly and steadily while inviting a fair amount of capital loss</p> Signup and view all the answers

<p>risk seekers who aim for high capital gain while inviting a higher risk</p> Signup and view all the answers

<p>carefully studying the economy, market trends, and investment alternatives and regularly monitoring these factors</p> Signup and view all the answers

<p>lending or owning</p> Signup and view all the answers

<p>a fixed maturity and a fixed income</p> Signup and view all the answers

<p>the borrower agrees to repay the principal to the investor on a specific date</p> Signup and view all the answers

<p>means the borrower agrees to pay the investor a specific rate of return for the use of the principal</p> Signup and view all the answers

<p>indicate ownership of investments</p> Signup and view all the answers

<p>is the risk associated with owning only one investment of a particular type which could do poorly</p> Signup and view all the answers

<p>diversify - the process of reducing risk by spreading investment money among several different investment opportunities</p> Signup and view all the answers

<p>is the possibility for an investor to experience losses due to the overall performance of financial markets</p> Signup and view all the answers

<p>is the possibility that the investment will fail</p> Signup and view all the answers

<p>means that the money will not grow as fast as inflation so it will not be worth as much in the future</p> Signup and view all the answers

<p>refers to how the role of time will affect all investments; the more time your money is invested, the higher the risk</p> Signup and view all the answers

<p>is the risk that the business cycle can impact your investments</p> Signup and view all the answers

<p>is the risk that all investments are subject to sharp changes in price as a result of events affecting a particular company</p> Signup and view all the answers

<p>is the risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss</p> Signup and view all the answers

<p>are fees or percentages of the selling price paid to salespeople, agents, and companies for their services in buying or selling an investment</p> Signup and view all the answers

<p>is using borrowed funds to invest with the goal of earning a rate of return and excess for the after-tax costs of borrowing</p> Signup and view all the answers

<p>are places where stocks and bonds are traded</p> Signup and view all the answers

<p>results when securities prices have risen 20 percent or more over time</p> Signup and view all the answers

<p>results when prices have declined in value by 20 percent or more</p> Signup and view all the answers

<p>involves a short-term price decline in the stock market of at least 10 percent in a stock, bond, commodity, or index to adjust for a recent price rise</p> Signup and view all the answers

<p>is the likelihood of large price swings due to a company's success (or lack thereof)</p> Signup and view all the answers

<p>attempt to predict the short-term movements of various markets and move capital from segment to another to capture market gains and avoid losses</p> Signup and view all the answers

<p>is the speed at which new information is reflected in investment prices suggesting that the security prices are reflective of their true value at all times</p> Signup and view all the answers

<p>is when you do something because everyone else is doing it</p> Signup and view all the answers

<p>is an investment strategy where investors buy a widely diverse mix of stocks to reinvest the dividends and hold onto those investments indefinitely</p> Signup and view all the answers

<p>is a systematic program of investing equal sums of money at regular intervals, regardless of the price of investments</p> Signup and view all the answers

<p>refers to the average costs of an investment if more shares are purchased when the price is down</p> Signup and view all the answers

<p>is calculated by dividing the share price by the number of investment periods</p> Signup and view all the answers

<p>is the actual cost basis of the investment used for income tax purposes, calculated by dividing the total amount invested by the total shares purchased</p> Signup and view all the answers

<p>is the process of spreading your assets among several different types of investments to lessen risk</p> Signup and view all the answers

<p>is an account at an investment firm whereby, for a fee, they buy and sell your mutual fund assets to automatically rebalance your portfolio</p> Signup and view all the answers

<p>is a technique that performs a large number of trial runs called simulations</p> Signup and view all the answers

<p>is an explanation of your investment philosophy and your logic on investing to reach specific goals</p> Signup and view all the answers

<p>is the increase and decrease in a nation's economic activity</p> Signup and view all the answers

<p>is a corporation's written pledge to repay a specified amount of money along with interest</p> Signup and view all the answers

<p>is a distribution of money, stock, or other property that a corporation pays to stockholders</p> Signup and view all the answers

<p>is the study of how wealth is created and distributed</p> Signup and view all the answers

<p>is an amount of money you can obtain quickly in case of immediate need</p> Signup and view all the answers

<p>is money that a business obtains from its owners</p> Signup and view all the answers

<p>is the written pledge of a government or municipality to repay a specified sum of money along with interest</p> Signup and view all the answers

<p>is a short-term loan that is approved before you actually need the money</p> Signup and view all the answers

<p>is the ability to buy or sell an investment quickly without substantially affecting its value</p> Signup and view all the answers

<p>is the date on which a corporation, government, or municipality will repay the borrowed money</p> Signup and view all the answers

<p>pools the money from many investors to invest in a variety of securities</p> Signup and view all the answers

<p>is the total income you receive on an investment over a specific period divided by the original amount invested</p> Signup and view all the answers

<p>is a high-risk investment made in the hope of earning a relatively large profit in a short time</p> Signup and view all the answers

<p>Stocks issued by small rapidly growing companies (small cap)</p> Signup and view all the answers

<p>is a retirement savings plan funded by employees often matched by contributions from the employer; contributions are usually made before taxes and grow tax-free until withdrawn</p> Signup and view all the answers

<p>is a yearly fee associated with some financial accounts</p> Signup and view all the answers

<p>is the yearly interest rate charged on outstanding credit card balances</p> Signup and view all the answers

<p>is anything of material value owned by an individual or company</p> Signup and view all the answers

<p>is a condition of insolvency where an individual or business is unable to pay debts</p> Signup and view all the answers

<p>is a type of loan in which an investor extends money to the government or a corporation with a set interest rate and maturity date</p> Signup and view all the answers

<p>is a plan for future spending and saving, weighing estimated income against estimated expenses</p> Signup and view all the answers

<p>is wealth in the form of money or property</p> Signup and view all the answers

<p>are profits from the sale of an investment</p> Signup and view all the answers

<p>is a saving certificate issued by a bank that deposits money for a specified length of time</p> Signup and view all the answers

<p>is an asset or amount of money provided as security for repayment of a loan</p> Signup and view all the answers

<p>is interest calculated on both the principal and the accrued interest</p> Signup and view all the answers

<p>is an agreement by which a borrower receives something of value now and agrees to pay the lender at a later date</p> Signup and view all the answers

<p>is a reporting agency that collects information on consumer credit usage</p> Signup and view all the answers

<p>is a card issued by a bank or other business for purchases using borrowed funds to be paid back later</p> Signup and view all the answers

<p>is a record of an individual's past borrowing and payments</p> Signup and view all the answers

<p>is a document outlining an individual's credit history for use by credit card issuers and other lenders</p> Signup and view all the answers

<p>is a company that compiles and provides information to creditors to facilitate their decision about extending credit</p> Signup and view all the answers

<p>is a number representing a person's creditworthiness based on past credit and payment history</p> Signup and view all the answers

<p>is a card that allows consumers to make purchases using money from their checking account</p> Signup and view all the answers

<p>is the state of owing money to another individual or business, or the amount of money borrowed</p> Signup and view all the answers

<p>is a sum paid regularly by a company to its shareholders</p> Signup and view all the answers

<p>is the amount a consumer pays upfront for something on the day of the purchase</p> Signup and view all the answers