Investing & Wealth Management - Strand 1 DOK 1 Vocab Review

What does the Time Value of Money mean?

• Money has the same buying power no matter when you receive it

• Money today is worth the same as money in the future

• Money today will lose buying power over time if not invested

• Money today cannot earn interest

What is simple interest?

• Interest earned on both principal and previous interest

• Interest earned only on the original amount

• Interest added every month

• Interest that is always higher than compound interest

What is compound interest?

• Interest earned only on the starting amount

• Interest earned on both principal and previous interest

• Interest paid only once a year

• Interest that does not grow

What does "principal" mean in finance?

• The person who manages your money

• The original sum invested or borrowed

• The interest rate on a loan

• The total returns from investment

What is the interest rate?

• The length of time you must leave money in the bank before making a withdrawal without penalty

• The total amount you have saved in your account after several years of investing

• The percentage used to figure out how much interest you earn or pay on money over time

• The fee you pay to the bank when you open a new savings account or investment fund

A money market account is:

• A savings account that usually earns more interest than a regular savings account

• A checking account that is used for everyday spending and purchases

• A type of loan that helps you pay for buying a house or real estate

• An investment account where you can only buy and sell company stocks

A Certificate of Deposit (CD) is:

• A deposit that earns interest for a fixed period

• An account you can withdraw from any time

• A type of insurance

• A bond issued by the government

What does asset allocation mean?

• Putting all your money into one stock

• Dividing investments among different asset types

• Choosing only the safest investments

• Buying and selling daily

Diversification means:

• Investing in only one company

• Spreading investments across different assets

• Saving money at home

• Only buying international stocks

Market risk (systematic risk) is:

• Risk that affects the whole market

• Risk only for small businesses

• Risk from buying risky stocks

• Risk that can be fully avoided