Personal Finance > Unit 3 > Flashcards

Unit 3 Flashcards

(72 cards)

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1
Q

Bond rating

A

external companies rate the likelihood that a bond holder will be paid back

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2
Q

Bond

A

investor loans money to a company or government which pays regular interest to the bond holder and returns the principal on the maturity date

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3
Q

Coupon

A

annual interest payment on a bond

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4
Q

Default

A

failure to repay a loan

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5
Q

Diversification

A

investing in a variety of stocks, bonds, and other funds to reduce overall risk

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6
Q

Dividend

A

money from profits of a company paid to shareholders, typically on a quarterly basis

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7
Q

Interest

A

the fee paid to you for using your money/fee charged to you for a loan or credit card

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8
Q

IPO (“going public”)

A

initial public offering; when a private company first sells shares to the public on a stick exchange (private –> public company)

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9
Q

Loan

A

agreement created with a fixed amount for a fixed period of time, usually with interest

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10
Q

Portfolio

A

collection of investments

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11
Q

Shareholders

A

a person, company, institution that owns at least one share in a company

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12
Q

Stock

A

a share of the value of a company which can be bought/sold/traded –> partial ownership of the company

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13
Q

Stock Split

A

when a company breaks up its existing shares to create more shares at a lower price

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14
Q

If a company is raising a certain amount of money at its initial public offering (IPO) by using a certain number of shares of stock, how would you find the value of each share?

A

amount the company is raising / number of the shares of stock

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15
Q

Compound Return

A

growth of an investment when earnings are reinvested

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15
Q

Inflation

A

the rate at which the price of goods and borrowing money changes (purchasing power decreases)

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16
Q

Investing

A

the process of setting money aside to increase wealth, especially over a long period of time

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17
Q

Investment

A

asset/item that is acquired with the goal of making a profit

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18
Q

Purchasing Power

A

the number of goods/services money can buy

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19
Q

Rate of Return (ROI, “Return on investment”)

A

the ratio of money gained or lost on an investment relative to the amount invested; gross, before deductions

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20
Q

Real Rate of Return

A

rate of return accounting for inflation and taxes –> net, after deductions

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21
Q

invested at — inflation percent to not lose amount

A

greater than or equal to

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22
Q

2 ways you can make money off stocks

A
  1. Dividends
  2. Stock increases in value and sell
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23
Q

How to minimize risk when investing?

A
  1. Diversification
  2. Invest less
  3. Trading strategy (bull and bear)
  4. Investment plan (sell at set price)
  5. Research on the company, trends, etc
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24
On a stock quote, the open is
todays opening price
25
On a stock quote, the high is
todays highest price
26
On a stock quote, the low is
todays lowest price
27
market cap
the total value of the entire company
28
0M- 50M
Nano Cap
29
50M - 300M
Micro Cap
30
300M - 2B
Small Cap
31
2B - 10B
Mid Cap
32
10B - 300B
Large Cap
33
300B+
Mega Cap
34
Price earning ratio in a stock quote
the price of one share divided by the earnings per share from the last 12 months; Lower suggest cheaper stocks whereas higher suggest more expensive stock
35
52 Week high and 52 Week low on stock price
are the highest and lowest price the stock has reached in the last year
36
Previous Close
the final closing price from the most recent day of trading
37
Dividend yield
shows the next 12 months of dividends per share divided by the current share price
38
Corporate Bonds
companies sell directly to investors at varying maturities with higher yields than government bonds
39
Investment-grade corporate bond (type of corporate bond)
the company has stable earnings and is financially solid
40
high yield or junk bonds (type of corporate bond)
higher returns because of a higher risk of defaulting often due to high debt or variable revenues
41
Government Bond
least risky because backed by the taxing power of the government
42
Federal Bonds (Government bonds)
can tax and print money, so they are almost risk-free
43
Provincial Bonds (Government bonds)
can tax but not print money, so still low risk
44
Municipal Bonds (Government bonds)
repaid with property tax revenue and tax-free on income you make
45
Agency Bonds (Government bonds)
pay back from revenue from the project, like highway tolls on new highways
46
Bond See-Saw
When rates go down, bond prices rise, and vice versa
46
Treasury Bonds (Government bonds)
T-bonds; Issued by the federal government but with maturities over 10 years, and the income is exempt from state income tax
47
Active trading
someone who is buying and selling investments (typically individual stocks and funds) within a short time frame to make a quick profit off price changes
47
Bear market
stock prices are falling
48
Bull market
stock prices are increasing
49
S&P 500
stock market index tracking the performance of 500 leading companies in the US; market capitalization = price of shares times the number of shares
50
Stock Exchange
market where shares in corporations are bought and sold
51
Stock
a share in a value of a company which can be bought or sold or traded as an investment; partial ownership of a company
52
Rule of 110
( (110- age)/100 ) * amount you want to invest 110 can change whether you want more or less risk; less risk will be a lower number while higher risk will be a higher number
53
Rule of 72
How much for your money to double interest percentage/72
54
Asset Allocation
dividing your investments among different assets, such as stocks, bonds, and cash.
55
Dollar cost average
investing the same amount of money in a target security at regular intervals over a certain period, regardless of price
56
ETF
A collection of stocks/bonds that are traded throughout the day (unlike a mutual fund)
57
TDF
A mutual fund/investment rebalanced over time for a specific retirement date
58
Pension
A retirement account offered in some job sectors that an employer maintains to give employers a fixed pay out of retirement
59
Index fund
a low fee portfolio of sticks on an index and is not actively managed (thus low fee)
60
Brokerage account
an account used to buy/trade/sell stocks/bonds/ and other types of funds
61
Individual retirement Account
an investing tool for retirement funds
62
Mutual fund
collection of stocks/bonds managed by an expert for a fee
63
Traditional IRA vs Roth IRA
Traditional (tax after) vs Roth (taxed first)
64
Robo-advisor
an online wealth management service that provides algorithm based portfolio management
65
You will need a bit ----- money each year of retirement because
more, of inflation
66
Hedge fund
actively managed and higher returns; a private investment fund in all kinfs of assets;
67
Savings account
a safe, low risk investment with low interest
68
Certificate of Deposit
safe investment, higher returns that savings account but lock in for time
69
Crops perform ----- to the market
opposite
Personal Finance
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