personal finance section 4 study questions

Topics: Investment, Finance, Bond, Mutual fund, Interest, Risk / Pages: 2 (471 words) / Published: Oct 24th, 2013
Section 4 Study Questions (12.0 points)
Answer each question fully. Complete sentences are not necessary.
Lesson 1 (3.0 points)
1.What is a money market account? (0.5 points)
An account that invests your money in low risk investments with predictable interest rates.
2.What is a liquidation policy? (0.5 points)
A policy that tells you when and how you can remove money from an account.
3.What is simple interest? (0.5 points) Interest gained only on the principle amount of an account.
4.What is compound interest? (0.5 points)
Interest that is added to the principle of an account.
5.What is the time value of money? (0.5 points)
The assumption that money is worth more the sooner it is received.
6.Name a strategy for saving money. (0.5 points) Buy anything that is on sale.
Lesson 2 (3.0 points)
1.What is investing? (0.5 points)
When you give money, time, or energy to gain something in the future.
2.What is financial risk? (0.5 points)
The possibility of losing money.
3.What is diversification? (0.5 points)
A strategy in which you spread out your investments among many different types.
4.What is risk tolerance? (0.5 points)
The amount of risk you are able to handle without being too negatively affected by it.
5.What are debt investments? (0.5 points)
Investments without ownership that promise a specific return on the investment.
6.What are equity investments? (0.5 points) Investments in which the owners hope to increase its value.
Lesson 3 (3.0 points)
1.What are stocks? (0.5 points)
Investment in which you can by partial ownership in a company
2.What are bonds? (0.5 points)
Debt investment in which you give the government or company money and they send back a bond promising to pay you back sometime in the future
3.What is fraud? (0.5 points)
Illegal dishonest behavior by a company.
4.What is an annuity? (0.5 points)
An agreement in which you pay a company a specific amount of money and they pay you back a larger

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