Unit 5 Review: Intro to Investing & Exponential Functions

Front

What happens to purchasing power when the interest rate is lower than the historical rate of inflation?

Back

Purchasing power will DECREASE.

Front

What is the definition of Face Value in bonds?

Back

Face Value is the value of the bond that will be paid out at the end of the bond’s life.

Front

What is the Coupon Rate in the context of bonds?

Back

The Coupon Rate is the annual interest rate paid to the holder of the bond.

Front

What does Maturity refer to in bond terminology?

Back

Maturity refers to the date when the bond will be paid back to the bondholder.

Front

What is the formula to calculate the percentage of a portfolio that consists of a specific investment?

Back

=Investment Value/Total Portfolio Value*100.

Front

What is the worst advice for maximizing investment returns?

Back

Make frequent trades and withdraw your short-term earnings.

Front

Why might an investor consider adding high-grade bond funds to their portfolio?

Back

High-grade bond funds tend to have very small fluctuations in price, making them a lower-risk investment option.

Front

What is the impact of inflation on savings accounts with low interest rates?

Back

The purchasing power of savings will decrease over time.

Front

What is diversification in investing?

Back

Diversification is the practice of spreading investments across various financial instruments to reduce risk.

Front

What does it mean to reinvest earnings?

Back

Reinvesting earnings means using profits from investments to purchase more of the same or different investments.