Personal Finance Unit 1

What is the most important aspect of saving money? time
Which of the following conditions will maximize the amount of interest you earn?a. high interest rate and long period of timeb. high interest rate and short period of timec. low interest rate and long period of timed. low interest rate and short period of time a
Besides paying interest on you principal, what else does interest compound on? your interest
How often is interest on a simple interest account paid? annually (once per year)
What is compounding frequency? How often your interest is calculated and added back into your account
three steps to use the rule of 72 1) Find out your interest rate2) Divide 72 by your interest3) The answer will tell you how long it will take for your money to double
Compound Interest Formula A=P(1+r/n)^nt
savings vehicle an account that is used to hold your savings
three types of savings vehicles savings account, money market account, certificates of deposit
most basic kind of savings vehicle savings account
savings vehicle that is part checking part savings money market
savings vehicle where the money is held for a specific period of time certificate of deposit
plan for your money budget
4 good budgeting practices 1) pay yourself first2) Don’t spend money you don’t have3) Save for a rainy day4) Save early, save often
How many months of salary should you have in savings? 6-12 months
what does compounding returns enable you to do? to earn more money by reinvesting your earnings
4 types of retirement plans 401k, 403b, traditional IRA, and roth IRA
which two retirement plans can you get through your employer 401k 403b
what does ‘IRA’ stand for Individual Retirement Account
Roth IRA vs. Traditional IRA Traditional IRA: you pay taxes when you retire, tax free nowRoth IRA: you pay taxes now, tax free when retire
what retirement plans offer tax benefits all
stock a share of ownership in a company
bonds A loan of money to a business or government that is paid back with interest over time
Treasury Bonds Bonds issued by the federal government, sometimes referred to as government bonds.
Who issues municipal bonds? state and local governments (city, county)
mutual fund a way of reducing the risk that any individual bond or stock will lose money(mix of different stocks and bonds chosen by a fund manager)
inex fund a specific type of fund that is made to track the performance of the market or certain investment types
when a ____matures, you receive your entire investment back plus any remaining interest bond
sometimes a ______ will pay you dividends stock/mutual fund
if you don’t want to purchase individual stocks, bonds, or investments, you can get them packaged together in a _______ mutual fund
why might a town issue a bond to raise money for different kinds of projects, traffic systems, or building parks
where are stocks at? stock exchange
what is a possible reason a company would sell a stock?a. to hire more peopleb. to expand its businessc. to develop new technologyd. b and ce. all of the above e; all of the above
what is the S&P 500 index that measures the performance of the stock market
What is the Dow Jones Industrial Average? an index that represents the performance of the 30 largest companies in the US
risk level: savings account low
which one has a higher risk? mutual funds or stock stock
as you get older, what should you do to your portfolio’s risk level decrease the risk gradually
investors nearing retirement will typically shift their investment portfolios to include ______ risk investments lower

Leave a Reply

Your email address will not be published. Required fields are marked *