Unit 6 review

Front

What is 'rate of return'?

Back

The gain or loss on an investment over a specified period, expressed as a percentage.

Front

How can investors spread their investments wisely?

Back

By spreading investments across different asset classes like stocks, bonds, and real estate.

Front

What is opportunity cost? Provide two examples.

Back

The potential benefits missed when choosing one option over another; examples include time spent studying instead of working, and money spent on a vacation instead of saving.

Front

What does the 80/20 Principle state?

Back

Roughly 80% of the effects come from 20% of the causes.

Front

What is a mutual fund?

Back

A pool of money collected from many investors to invest in securities like stocks, bonds, and other assets.

Front

Define 'diversification' in investing.

Back

The practice of spreading investments across various financial instruments to reduce risk.

Front

What is a stock?

Back

A share in the ownership of a company, representing a claim on part of the company’s assets and earnings.

Front

What is a bond?

Back

A fixed income instrument that represents a loan made by an investor to a borrower.

Front

Explain 'liquidity' in finance.

Back

The ease with which an asset can be converted into cash without affecting its market price.

Front

What is 'capital gain'?

Back

The increase in the value of an asset or investment over time, realized when the asset is sold.