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EconChapter8

TermDefinition
Portfolio A list of all of your investments.
Liquidity Quality of an asset that permits it to be converted quickly into cash without loss of value.
Share A piece of ownership in a company, mutual fund or other investment.
401(k) A retirement savings plan offered by a corporation to its employees; The employee contributes money from his/her gross pay, and the money grows tax deferred.
Investment An account or arrangement in which one would put their money for long-term growth.
Risk Degree of uncertainty of return on an asset.
Mutual Fund A pool of money managed by an investment company and invested in multiple companies.
IRA Tax-deferred arrangement for individuals with earned income; Individual retirement arrangement.
True/False: A single stock would be a good place to keep your emergency fund False
True/False: Diversification lowers risk with investing True
Long-term investments properly diversified include the following: Growth, growth and income, international, and aggressive growth.
Which of the following is a good investment option? Mutual funds.
Which statement is true about liquidity? The more liquid an investment, the less return.
Explain why you should never invest using borrowed money: This is a bad idea because it increases the risk of the investment.
Explain the risk return ratio: This is used by investors to compare the expected returns of an investment to the amount of risk they take to get the returns.
Explain why single stocks carry a high degree of risk and why mutual funds carry less risk. Single stocks carry a high degree of risk because you can not predict what one company will do. Mutual funds are less risky because you have, on average, 90-120 Page 2 companies in that fund.
Explain what the rule of 72 is and how it is calculated The rule of 72 is a simple way to determine how long an investment will take to double given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors obtain a rough estimate of how many years it'll take the investment to 2x
Is real estate a liquid investment? Explain why or why not. Real estate is not considered a liquid investment because it can not be quickly converted into straight cash.
Created by: bradenhfsow
 

 



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