Chapter 11, Economics – Flashcards
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principal
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the amount of money borrowed or invested
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interest
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the price paid for borrowed money or the price paid on invested money
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compound interest
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interest paid on both the principal and accumulated interest
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return and risk
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the riskier the investment, the greater chance to make money.....or lose it
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investment
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the use of assets to earn income or profit
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mutual fund
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a fund that pools the savings of many indivisuals and invests this money in a variety of stocks, bonds, and other financial assets
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diversification
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spreading out investments to reduce risk (don't put all your eggs in one basket)
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portfolio
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a collection of financial assets
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prospectus
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an investment report sent to potential investors
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return
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the money an investor receives above and beyond the sum of money initially invested
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bonds
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loans or IOU's that represent debt that the government or a corporation must repay to an investor.
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corporations (large businesses)
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raise funds by issuing or selling stocks and bonds.
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stock, bonds
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_____ represents ownership in a corporation, but _____ do not represent ownership in a corporation.
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certificate of deposit
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safe, government insured, investments; available through banks
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a certificate of deposit
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What requires the investor to deposit money for a set amount of time ranging from 6 mnths to 3 years?
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CD
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A _________ usually pays 3 to 4 times the interest rate of a regular savings account.
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maturity
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the time at which payment to a bond holder is due.
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savings bonds
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these are issued by the US government
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municipal bond
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these are issued by state and local governments
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Securities and Exchange Commission (SEC)
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an independent government agency that regulates financial markets and investment companies
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bonds
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out of bonds and stocks, which is the safer investment?
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shares
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stocks are issued in portions known as ______
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stock split
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the division of a single share of stock into more than one share
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stockbroker
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a person who links buyers and sellers of stock
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brokerage firm, stockbroker
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_____ is a business that specializes in trading stocks. A _____ would work in this business.
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bull market
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when the stock market rises steadily over a period of time.
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bear market
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when the stock market falls for a period of time.
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DOW, S&P 500
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The ____ and the ____ are index's that show how certain stocks have traded.
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the study of how people satisfy their wants and needs by making choices.
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define economics
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finance company because of high interest rate
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If you buy a computer, what investment will cost the most and why?
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stocks and bonds
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Corporations raise money by issuing (or selling) _____. [two words]
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The greater the risk, the higher the potential chance for return, but also the greater change of losing your investment.
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When investing money, how does risk relate to return?
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certificate of deposit
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Which of the following is the safest investment as far as risk? -certificate of deposit, -mutual fund, or -the purchase of stocks
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liquidity
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the ease at which people can convert an asset into cash
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coupon rate
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the interest rate a bond issuer will pay to a bond holder
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bond ratings
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how an investor decides which bonds to buy
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Standard and Poors&Moody's
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name 2 firms that publish bond ratings.
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junk bond
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lower-rated, potentially higher paying bond
