Saving & Investment - G12 Business Studies
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Questions and Answers

Define what is meant by 'saving' in terms of income.

Saving is the portion of income that is not spent on current expenditures.

What is the primary goal of 'investment'?

The primary goal of investment is to generate income.

Saving entails no risk, while investment always involves some level of risk.

True

What are the three main categories of investment objectives?

<p>The three main categories of investment objectives are security, growth, and income.</p> Signup and view all the answers

Which of these options is NOT a type of investment?

<p>Credit Cards</p> Signup and view all the answers

What does a stock represent?

<p>A stock represents a share in the ownership of a company, including a claim on the company's earnings and assets.</p> Signup and view all the answers

Preferred stocks typically offer voting rights, but no fixed dividends.

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

What is a bond, in simple terms?

<p>A bond is essentially a loan that an individual gives to a government or corporation, with the expectation of receiving regular interest payments and the repayment of the principal amount at a specific date.</p> Signup and view all the answers

Which type of bond is sold at a discount and does not pay regular interest?

<p>Zero-Coupon Bonds</p> Signup and view all the answers

Describe what a 'mutual fund' is and its purpose.

<p>A mutual fund is a pool of money managed by a professional fund manager. It collects money from multiple investors who share a common investment objective and invests those funds in a variety of assets, such as equities, bonds, or money market instruments.</p> Signup and view all the answers

What are the key activities involved in real estate investing?

<p>Real estate investing involves the purchase, management, sale, or rental of real estate properties with the aim of making a profit.</p> Signup and view all the answers

Residential real estate refers to properties used for business purposes, such as offices or shops.

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

What are commodities, and what are some examples?

<p>Commodities are raw materials or primary agricultural products that are traded on exchanges. Examples include precious metals like gold and silver, energy resources like oil and natural gas, and agricultural goods like wheat.</p> Signup and view all the answers

Which of these options is NOT a type of commodity?

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

What is cryptocurrency, and how does it function?

<p>Cryptocurrency is a digital currency, like Bitcoin, that uses cryptographic techniques to enable secure transactions without the need for a central government or bank.</p> Signup and view all the answers

Litecoin is an example of a cryptocurrency.

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

What is the first step in creating an investment plan?

<p>The first step in creating an investment plan is to evaluate your current financial situation.</p> Signup and view all the answers

What is the key purpose of determining investment goals?

<p>Determining investment goals helps identify your objectives, which are your reasons for investing, your timeframe for achieving those goals, and your desired rate of return.</p> Signup and view all the answers

Risk tolerance refers to an investor's willingness to accept potential losses in exchange for the possibility of higher returns.

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

Why is diversification important in investment planning?

<p>Diversification involves spreading your investments across different asset classes, which helps reduce risk and enhance the overall stability of your investment portfolio.</p> Signup and view all the answers

What is the role of a financial advisor in investment planning?

<p>A financial advisor provides guidance and support in making investment decisions based on an individual's financial situation and goals.</p> Signup and view all the answers

Study Notes

Saving & Investment - G12 Business Studies

  • Learning Objectives: Define saving and investment, evaluate saving options to meet short and long-term goals, evaluate investment options to meet short and long-term goals.

What is Saving?

  • Saving is the portion of income not spent on current expenses.
  • It's the money set aside for future use.

What is Investment?

  • Investment is acquiring assets to generate income.
  • The goal isn't immediate consumption but future wealth creation.

Investing vs. Saving

  • Saving involves accumulating money with no risk.
  • Investing leverages money for potential future gain; it entails some risk.
  • Both aim for future capital, but their growth methods differ significantly.
  • Saving for a down payment illustrates this difference. Many advisors recommend parking cash in safer investments like savings accounts when saving for a large purchase.

Investing vs. Saving (Continued)

  • Savings accounts usually have federal insurance coverage on balances up to $250,000.
  • This kind of financial guarantee is often absent in investment accounts.

Types of Savings

  • Savings Account
  • Money Market Account
  • Certificate of Deposit

Types of Savings (Details)

  • Savings Account: Earns interest and offers quick access to funds.
  • Money Market Account: Earns interest and may provide check-writing and ATM privileges.
  • Certificate of Deposit: Typically has the highest interest rate among savings but restricts access to funds.

Types of Investment

  • Stocks
  • Bonds
  • Mutual Funds
  • Real Estate
  • Commodities (e.g., gold)
  • Cryptocurrency

Stocks

  • Stocks represent ownership in a company, including claims on earnings and assets.
  • Stockholders are partial owners. Stock value rises or falls with the company's value.
  • Types include common stocks (allowing voting and dividends) and preferred stocks (fixed dividends but no voting).

Bonds

  • Bonds are issued by governments and corporations to raise money.
  • Bond buyers essentially loan money, and the issuer agrees to repay the face value plus periodic interest payments at a future date.
  • Bonds are often considered a lower-risk investment compared to stocks, but they often yield lower returns.

Types of Bonds

  • Government bonds: Issued by national governments (e.g., Canada ,US).
  • Corporate bonds: Issued by public or private companies.
  • Municipal bonds: Issued by local or state governments to fund projects.
  • Zero-coupon bonds: Sold at a discount and don't pay regular interest, instead appreciating in value over time.

Mutual Funds

  • Mutual funds are pools of investor money managed by a professional fund manager.
  • Investors share investment goals. Funds invest in equities, bonds, money market instruments, etc.

Real Estate

  • Real estate investment involves purchasing, managing, and selling or renting real estate for profit.
  • Actively involved investors are entrepreneurs or real estate investors.

Real Estate (Types)

  • Residential: Houses, apartments, condos
  • Commercial: Offices, shops, hotels, factories

Commodities

  • Commodity funds invest in raw materials (e.g., oil, wheat) and/or precious metals (e.g., gold, silver).

Cryptocurrency

  • Cryptocurrency is a digital currency (e.g. Bitcoin).
  • It serves as an alternative payment method or speculative investment.

How to Make an Investment Plan

  • Step 1: Evaluate your current financial situation (how much you can afford to invest).
  • Step 2: Determine your financial investment goals (objectives, timeline).
  • Step 3: Identify your risk tolerance (how much risk you're willing to take).
  • Step 4: Make your investment decisions (diversify portfolio, consider advice).

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Saving & Investment G12 Business Studies PDF

Description

This quiz covers the key concepts of saving and investment, distinguishing between the two, and their importance in achieving financial goals. You'll explore various saving options for short-term and long-term objectives, as well as investment strategies to build wealth over time. Test your understanding of these essential financial principles.

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