Fundamnetals of Investing .pdf - Page | 23 2.4.4.A2 The Fundamentals of Investing Total Points Earned Name 44 Total Points Possible Date Percentage

Fundamnetals of Investing .pdf - Page | 23 2.4.4.A2 The...

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Unformatted text preview: Page | 23 2.4.4.A2 The Fundamentals of Investing Total Points Earned Name 44 Total Points Possible Date Percentage Destiny Kennedy 11/12/2019 Class Personal Finance Directions: Define each of the following types of investment tools. Indicate if each tool is a form or lending or owning. (2 points each) Investment tool Definition Is it a form of lending or owning? Owning Stocks share of ownership in a company Bonds Lending a form of lending to a company or the government Mutual funds when the company combines the funds of Owning many different investors Index funds a mutual fund that was designed to reduce fees Owning Real estate ownership of residential or commercial Owning property or land Speculative investments futures, options, collectibles Owning © Take Charge Today – August 2013 – The Fundamentals of Investing Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Page | 24 2.4.4.A2 Directions: Match the following words with the correct definition. (1 point each) c 1. ____The possibility that an investment will fail to pay the expected return or A. Inflation fail to pay a return at all. B. Inflation risk C. Investment Risk a 2. ____The rise in the general level of prices. D. Risk d 3. ____ The uncertainty regarding the outcome of a situation of event. b 4. ____ The danger that money won’t be worth as much in the future as it is today. Directions: Complete the following questions. 5. Provide three examples of how the purpose of investing is different than the purpose of saving. (4 points) They help build net worth 6. Complete the pyramid by order the following from high risk to low risk. (4 points) o Bonds High Risk o Stock and Real Estate Spectacle o Speculative o Mutual funds and index funds Stock & real estate Mutual funds & index Bonds Low Risk 7. Describe the four types of returns. (4 points) o Interest: Money paid for using somebody's money o Dividends: Share of profits distributed in cash o Rents: Fee charged for the use of property or land o Capital Gains: unearned income © Take Charge Today – August 2013 – The Fundamentals of Investing Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Page | 25 2.4.4.A2 8. Describe the concept of investment philosophy and how it relates to portfolio diversification. (2 points) Potential for higher returns 9. What is the difference between a full‐service brokerage firm and a discount brokerage firm? (2 points) Only completes orders you give them 10. What are two questions you should ask before hiring a brokerage firm? (2 points) How are firms financial compensated? how does the firm rank in comparison compare to other firms? 11. What are two benefits of a tax‐advantaged account? What is a trade‐off? (3 points) Reduce and defer Directions: For the following questions, please indicate if the statement is True or False by writing a T or F on the line. (1 point each) t 12. ____ Taxes must be paid on all investment profits in the year the unearned income is received. t 13. ____ When focusing on wealth accumulation, the rate of return earned on an investment should be higher than the rate of inflation. t 14. ____ An individual’s investment philosophy changes throughout their lifetime. f 15. ____ Individuals with an aggressive investment philosophy are not willing to take on risk for the potential of higher returns. f 16. ____ Portfolio diversification is a method that helps an individual receive the highest return on investment. t 17. ____ In order to buy and sell investments (except for real estate and certain speculative investments), an individual needs to utilize a brokerage firm. f 18. ____ A full service general brokerage firm usually charges lower commission fees than a discount broker. © Take Charge Today – August 2013 – The Fundamentals of Investing Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona ...
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