What is diversification?

Spreading risk among many types of investments

Choose the correct steps for finding the gain in principal profit for return on investment: Purchase Price, Sales Price, Profit in Dollars, ROI

Purchase Price, Sales Price, Profit in Dollars, ROI

What is the main goal of speculative investing?

To make quick, high-risk investments for potential high returns

What is the role of dividends in investing?

They are payments made to shareholders from a company's profits.

What is one advantage of Social Security as a source of retirement income?

It provides a guaranteed income for life, which helps ensure financial stability during retirement.

What is the difference between temporary and permanent investments?

Temporary investments are held for less than a year; permanent investments are held for five years or more.

What is the importance of starting to invest early?

It allows small sums of money to grow over time

What is the main purpose of a put-and-take account?

To cover short-term needs and emergencies

What is the relationship between risk and potential returns in investing?

Higher risk usually means higher potential returns.

What is the significance of keeping investment knowledge current?

It ensures that investors can make informed decisions

What are the two primary ways investors can generate returns from stock investments?

Stock appreciation and dividends

Who are stockholders?

People who own shares of stock in the corporation

Money paid to stockholders from the corporation’s earnings

What is a capital gain?

An increase in the value of the stock over time

A stockholder’s written authorization to transfer voting rights to someone else

Choose the correct steps for finding the gain in dividends profit for return on investment? Options: Purchase Price, Profit in Dollars, Profit in Dividends, ROI; Purchase Price, Value at end of year, Gain in value, Total profit, ROI; Purchase Price, Profit in Dividends, ROI; Purchase Price, Sales Price, Profit in Dollars, ROI

Purchase Price, Profit in Dividends, ROI

What are income stocks?

Stocks that have a consistent history of paying high dividends

What is the difference between Current Price and Previous Close in a stock quote?

Current Price is the price at which the stock last traded during the current trading session, while Previous Close is the price at which the stock last traded at the end of the previous trading session.

An assigned dollar value given to each share of stock.

What factors affect stock price?

The company’s earning power, Interest rates, Stock market conditions

What is a stock index?

A benchmark that investors use to judge the performance of their investments.

What is the primary reason why bonds are considered a less volatile investment compared to stocks?

Bonds offer a fixed interest rate, while stock returns are influenced by market forces.

What is the main purpose of credit rating agencies in the context of bond investments?

To assess the financial strength of bond issuers and assign ratings.

How does interest rate risk affect the value of existing bonds?

Rising interest rates decrease the value of existing bonds, as investors seek higher-yielding options.

What is the main reason why high yield or junk bonds offer significantly higher returns than other bond portfolios?

They are issued by companies with a higher risk of defaulting on loan payments.

Choose the correct steps for finding the gain in principal and dividends for return on investment: Purchase Price, Sales Price, Profit in Dollars, ROI

Purchase Price, Sales Price, Profit in Dollars, ROI

Which Cognitive Biases contribute to making bad investing decisions: Recency, Loss Affect, Anchoring, Bandwagon, Contrast; Recency, Loss Aversion, Attributions, Bandwagon, Status Quo; Recency, Loss Aversion, Authority, Bandwagon, Overconfidence; Recency, Loss Aversion, Anchoring, Bandwagon, Confirmation?

Recency, Loss Aversion, Anchoring, Bandwagon, Confirmation

Which type of bonds can be bought through banks or brokers?

Corporate bonds, Municipal bonds, Agency bonds

Which of the following is a primary benefit of having a well-structured estate plan? Options: It ensures that your assets are distributed according to your wishes and can help minimize estate taxes., It guarantees that your investments will always increase in value., It allows you to avoid paying any taxes during your lifetime., It ensures that you will never need to update your financial documents.

It ensures that your assets are distributed according to your wishes and can help minimize estate taxes.

What is the primary purpose of the Securities and Exchange Commission (SEC)?

To oversee the stock market and protect investors

Why would you choose to have a will drawn by an attorney?

An attorney can ensure that your will is legally valid and accurately reflects your wishes, reducing the risk of disputes.

Why is it more useful to look at the percent change of a stock price, rather than the change in dollar amount?

Percent change accounts for the stock's initial price, providing a more accurate measure of its performance.

It is best to have a rate of return on an investment that is ______ than the rate of inflation _______.

higher; to maintain purchasing power

Which of the following best describes deflation? A decrease in the cost of goods and services, An increase in the cost of goods and service, A decrease in purchases of a good or service, An increase in purchases of a good or service

A decrease in the cost of goods and services

PF U8 Diversifying My Future Test Flashcards

Student preview

55 questions

Show all answers

1.

FLASHCARD QUESTION

Front

What is the approximate doubling time for an investment earning a 6% annual interest rate, according to the Rule of 72?

Back

12 years

2.

FLASHCARD QUESTION

Front

What is investing?

Back

Using long-term savings to earn a financial return.

3.

FLASHCARD QUESTION

Front

What is one of the main objectives of the Wall Street Reform Act?

Back

To prevent another financial crisis by increasing regulation of the financial industry

4.

FLASHCARD QUESTION

Front

What is inflation?

Back

A rise in the general level of prices

5.

FLASHCARD QUESTION

Front

How does investing help beat inflation?

Back

By growing faster than the inflation rate

6.

FLASHCARD QUESTION

Front

What is an investment portfolio?

Back

A collection of investments

7.

FLASHCARD QUESTION

Front

What is investment risk?

Back

The chance that an investment’s value will decrease.

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