What is the Trade Off?

A trade-off is a strategy to eliminate competition.

A trade-off is a method to maximize profits.

What is the purpose of Investment Tools?

Long Term Goals (College, Buying a House, Retirement)

To provide entertainment and leisure activities.

To track personal health and fitness goals.

Return is the profit or loss from an investment.

Return is the amount of money invested.

Return refers to the initial capital of an investment.

What is Rate of Return?

R = Dollar Amount of Return or Profit / Dollar Amount Invested

Rate of Return is the total amount of money earned from an investment.

Rate of Return is the time it takes to recover the initial investment.

What is Inflation and Inflation Risk?

Inflation is the rise in prices over time, and inflation risk is the danger that investment returns will not keep pace with inflation.

Inflation is the decrease in prices over time, and inflation risk is the chance of losing money in the stock market.

Inflation is the stability of prices, and inflation risk is the assurance of high investment returns.

What are Sources of Investments?

Savings, Gifts, Inheritances, Gains or Profits

What are costs associated with Investments?

Finance Charges, Investment Fees; Advisor or Broker Fees; Transaction Fees; Market Losses

What is the difference between Simple Interest and Compound Interest?

Simple Interest is based only on the principal, while Compound Interest is based on the principal plus accumulated interest.

Compound Interest is always lower than Simple Interest over time.

Simple Interest is calculated on a daily basis, while Compound Interest is calculated annually.

What are the formulas for computing simple interest and compound interest

Simple interest formula: I = P * r * t; Compound interest formula: A = P (1 + r/n)^(nt)

I = P + r + t; A = P * (1 + r)^(t)

I = P * r / t; A = P * (1 - r/n)^(nt)

What is Social Security and what is its purpose?

A Federal Program that pays benefits (income) to people who have retired; people who are disabled; and survivors of deceased workers

Social Security is a private insurance program for wealthy individuals.

Social Security is a tax on income that funds military operations.

What factors affect the amount of Social Security Benefits?

Factors affecting Social Security Benefits include earnings history, age at benefit start, years worked, AIME, COLA, and deductions.

Marital status and number of children

Location of residence and health insurance

Is Social Security enough for retirement?

No, Social Security is generally not enough for retirement.

Yes, Social Security is sufficient for retirement.

Social Security provides a comfortable retirement income.

What does “Pay Yourself First” mean?

It means to prioritize saving a portion of your income before any other expenses.

It means to spend all your income on immediate needs.

It refers to investing in stocks before saving money.

How much be kept in an emergency fund?

3 to 6 months' worth of living expenses

1 to 2 months' worth of living expenses

12 months' worth of living expenses

What is value of having investments?

Investments provide passive income (not wages) in order to increase wealth

Investments guarantee immediate profits.

Investments are only for wealthy individuals.

What is the Rule of 72?

The Rule of 72 is a shortcut to estimate how long it takes for an investment to double in size. At a rate of return of 6%, it will take 12 years for an investment to double. .

The Rule of 72 is a formula used to determine the risk level of an investment.

The Rule of 72 calculates the exact amount of interest earned on an investment.

Bonds are a form of lending from an investor to a company

Bonds are physical assets that can be traded on the stock market.

Bonds are stocks that represent ownership in a company.

What is a Municipal Bond?

A Municipal Bond is a loan to a local government

A municipal bond is a type of stock traded on the stock market.

A municipal bond is a loan given to private companies for profit.

Why are Bonds Issued?

Bonds are issued to raise money or capital rather than bowering money from a bank

Bonds are issued to provide free services to the public.

Bonds are issued to decrease government debt.

What is the Maturity Date?

The maturity date is the date the amount of the Bond (or loan) is repaid to the investor

The date when interest payments begin.

The date when a financial instrument is first issued.

What are the pros and cons of Bonds as an Investment?

Pros: Typical a safe investment; provides a fixed rate of return until the maturity date Cons: Returns are fixed

Stocks are shares that represent ownership in a company.

Why are stocks issued?

Stocks are issued to raise money or capital for a company to enter the market or expand production

Stocks are issued to reduce company debt.

Stocks are issued to pay dividends to shareholders.

How are stocks different than bonds?

Stocks are issued to raise money or capital for a company to enter the market or expand production

Stocks are always less risky than bonds.

Bonds provide ownership in a company; stocks represent loans.

What are two ways that Stocks provide a return on investment?

Stocks can provide: (1) a portion of profits distributed on a regular basis know as Dividends, and (2) an increase in value over time know as Capital Gains

How are stocks and bonds bought and sold to the public?

Stocks and bonds are bought and sold through an exchange where brokers connect buyers and sellers.

Stocks and bonds can be purchased directly from the companies without intermediaries.

Stocks and bonds are only available through government auctions.

What is a Stock Exchange?

A stock exchange is an organized, central service where a limited number of people are allows to buy and sell all stocks, bonds, and other investments (e.g. NYSE, NASDAQ).

A stock exchange is a type of bank that offers loans.

A stock exchange is a government agency that regulates businesses.

A brokerage firm facilitates the process for buying and selling on the stock exchange.

A brokerage firm is responsible for managing company finances.

A brokerage firm only provides investment advice.

What is a Discount Broker vs Full-Service Broker?

A discount broker charges lower fees and offers minimal services, while a full-service broker provides extensive services and personalized advice at a higher cost.

Both discount and full-service brokers charge the same fees but differ in the types of investments they offer.

A discount broker offers personalized advice at a lower cost, while a full-service broker charges higher fees for minimal services.

What are Mutual Funds?

Mutual funds are pooled investment vehicles managed by professionals that invest in a diversified portfolio of assets.

Mutual funds are government bonds that guarantee fixed returns.

Mutual funds are individual stocks that are traded on the stock exchange.

What are Index Funds?

Index Funds are a combination of investments that match the performance of a particular index (e.g. Dow Jones (30 Largest Companies) and S&P 500)

Index funds are actively managed by a team of experts.

Index funds are only available to wealthy investors.

A portfolio is a collection of investments

A portfolio is a single financial asset.

A portfolio is a type of insurance policy.

What is diversification?

Diversification is reducing investment risk by spreading money among different types of investments .

Diversification refers to the process of eliminating all investments to avoid losses.

Diversification is a method to increase risk by concentrating investments in a single asset.

What is the Securities and Exchange Commission (SEC) and what is its purpose?

The SEC is a U.S. government agency that regulates the securities industry to protect investors and maintain fair markets.

The SEC is a global agency that oversees international trade regulations.

The SEC is a private organization that promotes corporate profits.

Unit 6 Economy

Authored by Eliana Arango

Business

9th - 12th Grade

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42 questions

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the Time Value of Money?

The Time Value of Money states that money loses value over time due to inflation.

The Time Value of Money is the concept that money available today is worth more than the same amount in the future due to its potential earning capacity.

The Time Value of Money is the idea that future money is always worth more than present money.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the Present Value and Future Value Formulas?

PV = the present-day value of money to be received in the future
FV = the value of money in the future that is invested today.

Present Value: PV = FV * (1 - r)^n; Future Value: FV = PV / (1 - r)^n

Present Value: PV = FV * (1 + r)^n; Future Value: FV = PV / (1 + r)^n

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are some Types of Savings Tools?

Checking accounts

Investment portfolios

Savings accounts, certificates of deposit (CDs), money market accounts, high-yield savings accounts.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the pros and cons of Savings Tools?

Pros: Earn interest, safe storage of funds.

Cons: Lower returns, potential fees.

Guaranteed high returns, no fees

High liquidity, easy access to funds

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the purpose of Savings?

To accumulate debt for future expenses.

The purpose of savings is to provide financial security and enable future investments or purchases.

To spend money immediately on luxury items.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are some Types of Investment Tools?

Stocks, bonds, mutual funds, ETFs, real estate, commodities

savings accounts

credit cards

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What are the pros and cons of Investing Tools?

Guaranteed profits

Pros: Higher Rate of Return; To Build Wealth
Cons: More Risk; Less Liquid

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Unit 6 Economy

What is the Time Value of Money?

What are the Present Value and Future Value Formulas?

What are some Types of Savings Tools?

What are the pros and cons of Savings Tools?

What is the purpose of Savings?

What are some Types of Investment Tools?

What are the pros and cons of Investing Tools?

What is the Trade Off?

What is the purpose of Investment Tools?

What is Return?

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