Personal Finance Exam 13-16

Inflation Risk

• The value of an investment (such as government or corporate bonds) with a fixed rate of return decreases (increases) when overall interest rates in the economy increases (decreases).

• During periods of high inflation, the financial return on an investment may not keep pace with the inflation rate. Therefore, you lose purchasing power

• Bad management, unsuccessful products, competition, and the economy may cause the business to be less profitable; affects stocks, corporate bonds, and mutual funds that invest in stocks of bonds

• Prices fluctuate because of systematic risk, unsystematic risk, and behaviors of investors

Interest Rate Risk

• Bad management, unsuccessful products, competition, and the economy may cause the business to be less profitable; affects stocks, corporate bonds, and mutual funds that invest in stocks of bonds

• Prices fluctuate because of systematic risk, unsystematic risk, and behaviors of investors

• During periods of high inflation, the financial return on an investment may not keep pace with the inflation rate. Therefore, you lose purchasing power

• The value of an investment (such as government or corporate bonds) with a fixed rate of return decreases (increases) when overall interest rates in the economy increases (decreases).

Business Failure Risk

• Bad management, unsuccessful products, competition, and the economy may cause the business to be less profitable; affects stocks, corporate bonds, and mutual funds that invest in stocks of bonds

• Prices fluctuate because of systematic risk, unsystematic risk, and behaviors of investors

• The value of an investment (such as government or corporate bonds) with a fixed rate of return decreases (increases) when overall interest rates in the economy increases (decreases).

• During periods of high inflation, the financial return on an investment may not keep pace with the inflation rate. Therefore, you lose purchasing power

Market Risk

• Prices fluctuate because of systematic risk, unsystematic risk, and behaviors of investors

• Bad management, unsuccessful products, competition, and the economy may cause the business to be less profitable; affects stocks, corporate bonds, and mutual funds that invest in stocks of bonds

• During periods of high inflation, the financial return on an investment may not keep pace with the inflation rate. Therefore, you lose purchasing power

• The value of an investment (such as government or corporate bonds) with a fixed rate of return decreases (increases) when overall interest rates in the economy increases (decreases).

Investment Liquidity

• A distribution of money, stock or other property that a corporation pays to stockholders

• The process of spreading your assets among several different types of investments to lessen risk.

• The ability to buy or sell an investment quickly without substantially affecting the investment’s value

• Money that a business obtains from its owners; stockholders buy shares of a company’s stock

Asset Allocation

• Money that a business obtains from its owners; stockholders buy shares of a company’s stock

• The process of spreading your assets among several different types of investments to lessen risk.

• The ability to buy or sell an investment quickly without substantially affecting the investment’s value

• A distribution of money, stock or other property that a corporation pays to stockholders

Equity Capital

• A distribution of money, stock or other property that a corporation pays to stockholders

• The process of spreading your assets among several different types of investments to lessen risk.

• The ability to buy or sell an investment quickly without substantially affecting the investment’s value

• Money that a business obtains from its owners; stockholders buy shares of a company’s stock

Dividend

• The process of spreading your assets among several different types of investments to lessen risk.

• Money that a business obtains from its owners; stockholders buy shares of a company’s stock

• A distribution of money, stock or other property that a corporation pays to stockholders

• The ability to buy or sell an investment quickly without substantially affecting the investment’s value

A loan to a corporation, the government, or a municipality

• government bond

• business loan

• corporate bond

• share loan

a written pledge of a government or municipality to repay a specific sum of money along with interest

• government bond

• business loan

• corporate bond

• share loan