Unit 3 Economics Capital Markets / Investing

Identify the four things to consider when making an investment. rate of return risk/ diversification liquidity tax benefit.

compound interest Compound interest is money earned on a sum of money that is invested plus the interest paid on that money over time.

Identify the three reasons to save money. To have security To earn interest / present value v future value for major purchase / college

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.

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

Identify the two factors that have the greatest impact on compound interest. rate of return time

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.

Capital Money saved and loaned in order to earn interest and create economic wealth

Buying a number of investments to reduce risk and to balance out the high and low performers Diversification

Whether an investment is easy to sell, how quickly you can access your money. Liquidity

The purchase of something of value with the expectation that over time it will increase in value and produce a profit investment

A share of ownership in a corporation Stock

Smallest unit of ownership in a corporation. share 1

The idea that money is worth more now than it will be in the future. Present value / less $2010 / more $

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

the best place to money to earn the highest rate of return on a retirement investment and also minimize risk is: A mutual fund

Money loaned to a business or the government for a moderate, fixed rate of return, but with little liquidity. bond

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