Free Economics Flashcards about Saving and Investing

Saving and Investing

Question Answer
Saving Setting money aside for later use
Investing Taking risks with savings in order to earn a higher rate of return
Principal The original amount of your investment (how much you put in originally)
Interest The price for borrowing money
Maturity Time required for money to be in a particular investment
Liquidity The ability to turn an investment into cash (how quickly it can pay out)
Capital Gain Selling an investment for more than you paid for it
Capital Loss Selling an investment for less than you paid for it
Savings Accounts Used to save money for large purchases, also used for a rainy day (emergencies)
Passbook Savings Account Regular savings account
Money Market Account Earns a higher amount of interest than a normal savings account
Certificates of Deposit (CDs) Time deposit in which you agree to deposit a sum of money with a financial institution for a certain amount of time
Stocks Buying partial ownership in a company
Dividends A sum of money paid regularly by a company to its shareholders out of its profits
Mutual Funds Pools of money from many people
The Dow (Stock Indexes) Tracks prices of 30 representative stocks, tracks the price of 500 stocks
Bull Market Optimism in market; stock prices are generally climbing
Bear Market Pessimism in market; stock prices falling
Corporate bonds Debt security issued by a corporation and sold to investors
Government bonds A bond issued by a national government, generally with a promise to pay periodic interest payments and to repay the face value on the maturity date
Bonds – Loan (no ownership)
– No voting rights
– Less liquid (maturity date)
– Less risk (lower potential for gain/loss)
– Profit through
Stocks – Ownership
– Voting rights
– More liquid (sell anytime)
– More risk
– Profit through
– Dividends (buy low & sell)
– Selling high (high = capital gain)
Dividends & selling high How do you profit in the Stock Market?
Predetermined interest rate How do you profit in the Bond Market?

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