unit 3 economics capital markets / investing. identify the four things to consider when making an...
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Unit 3 EconomicsCapital Markets / Investing
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Identify the four things to consider when making an investment.
• rate of return
• risk/ diversification
• liquidity
• tax benefit.
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compound interest
• Compound interest is money earned on a sum of money that is invested plus the interest paid on that money over time.
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Identify the three reasons to save money.• To have security• To earn interest / present value v future value• for major purchase / college
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Identify benefits of a mutual fund
• simplifies stock investing (uses experts)
• minimizes risk• balances high and low
performing stocks because it includes, blue chip and growth stocks, as well as bonds and other investment catagories.
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Identify the following as either a high risk or low risk investment
• savings account• low risk• growth stock• high risk• corporate bonds• low risk• precious metals • high risk
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Identify the two factors that have the greatest impact on compound interest.
• rate of return
• time
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Identify eight different types of investments
• Savings account• Money market• Certificate of deposit• Bond• Blue-chip stock• Growth stock• Real estate• Commodities / Precious
metals, oil, crops, etc.
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Capital
Money saved and loaned in order to earn interest and create economic wealth
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Buying a number of investments to reduce risk and to balance out the high and low performers
• Diversification
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Whether an investment is easy to sell, how quickly you can access your money.
• Liquidity
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The purchase of something of value with the expectation that
over time it will increase in value and produce a profit
• investment
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A share of ownership in a corporation
• Stock
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Smallest unit of ownership in a corporation.
• share1
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The idea that money is worth more now than it will be in the future.
• Present value
1990 1990
2010 / less $ 2010 / more $
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The positive and negative investment qualities of a certificate of deposit are:
• Positives:• Higher interest rate than
regular savings account• Safe / federally
guaranteed
• Negatives• No liquidity
• No tax benefit
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the best place to money to earn the highest rate of return on a retirement investment and also minimize risk is:
• A mutual fund
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Money loaned to a business or the government for a moderate, fixed rate of return, but with little liquidity.
• bond
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The positive and negative investment qualities of real estate?• Positives:• Place to live• Increases in value over time• Tax benefit
• Negatives:• No liquidity• Risky in the short-term• Has lower rate of return than
the stock market