Unit 3 Test

Cancelled Check

Checks you have written that have been cashed

True or False? In a cancelled check, the money is no longer in your account.

True

Deposits Outstanding

Deposits you have made but have not been processed yet by the bank

Checks Outstanding

Checks you have written but have not been cashed

True or False? With a check outstanding, the money is still in your account.

True

Investing

using your own money to make more money

It’s best to start investing…

early

Return

income than an investment produces

A return is always stated…

as a percentage of the amount invested

Dividends on Stocks

profit sharing

What does a regular interval for dividends on stocks consist of?

every 3 months

Capital Gains

when you profit from sale of an investment

Investor who wants less risk in their investments

Conservative

Investor who is a risk taker in investments

Speculative

What type of investment risk is a CD (Certificate of Deposit)?

conservative

What type of investment risk is a savings account?

conservative

What type of investment risk is a money market?

conservative

What type of investment risk is government securities (e.g, bonds and t-bills)?

conservative

What type of investment risk are collectibles?

speculative

What type of investment risk are aggressive stocks?

speculative

What type of investment risk is property?

speculative

Volatility

the degree to which an investment’s return or value may change

Liquidity

how quickly something can be turned into cash.

Stock Exchange

where you can buy and sell stock

Indexes

indicators that determine how well the economy is doing.

NYSE: New York Stock Exchange is an example of…

a stock exchange

The Chicago Board of Trade is an example of…

a stock exchange

NASDAQ is an example of…

a stock exchange

American Mercantile Exchange is an example of…

a stock exchange

DOW Jones is an example of…

an index

NASDAQ Composite is an example of…

an index

Standard & Poor’s 500 are an example of…

an index

The most widely used indicator of the overall condition of the stock market

DOW Jones Industrial Average

Bull Market

rising economy

Bear Market

declining economy

Futures are ____ risk investments

high

Options are ____ risk investments

high

Commodities are ____ risk investments

high

Penny stocks are ____ risk investments

high

Precious metals are ____ risk investments

high

Income stocks are ____ risk investments

moderate

Growth stocks are ____ risk investments

moderate

Mutual funds are ____ risk investments

moderate

Index funds are ____ risk investments

moderate

Real estate is a ____ risk investment

moderate

Cash and cash equivalents are ____ risk investments

low

Money market accounts are ____ risk investments

low

Funds are ____ risk investments

low

Max contribution of an IRA

$7000 per year

Types of IRA

Roth & Traditional

Age one is allowed to withdraw from their IRA or 401k

59 1/2

401k

company-based retirement fund using pre-tax dollars

Roth IRA

retirement account where money goes in “after tax"

Traditional IRA

retirement account where money goes in “pre-tax”

Private retirement account where withdrawals after age 59 ½ are TAX FREE

Roth IRA

Private retirement account withdrawals after age 59 ½ are taxed

Traditional IRA

Type of private retirement account where you receive tax deductions for contributions you make.

Traditional IRA

Bonds

issued to raise money for government, business, etc.

Stocks

ownership of a company

When companies and governments borrow money from investors and then pay interest at maturity (when it’s cashed in)

Bonds

A way to earn steady income with dividends, but also risky

Stocks

It’s best to have ____ for diversification

both bonds and stocks

Type of stock where price fluctuates at every second

common stock

Type of stock that provides voting rights

common stock

Most common type of stock

common stock

Type of stock where dividends are paid at a fixed rate

preferred stock

Type of stock with no voting rights

preferred stock

Both types of stocks…

receive dividends

Both types of stocks…

involve share of ownership

Both bonds and stocks…

are a type of investment

Payee

person who the check is written to

Drawer

person who wrote the check

Drawee

the bank

A business owned by investors who are called stockholders and shareholders

commercial banks

Primary functions of a commercial bank

to receive, transfer, and lend money

Commercial banks are also referred to as…

full service banks

Services done by a commercial bank

savings, checking, and lending

Main way people bank today

online banking

Agency that protects bank customers by insuring deposits (since 1933)

Federal Deposit Insurance Corporation (FDIC)

Provides insurance coverage up to $250,000

Federal Deposit Insurance Corporate (FDIC)

Similar to commercial bank in terms of services but main focus is mortgages

Savings & Loan Associations

Nonprofit with financial services offered only to members

Credit Unions

Often quicker to roll out new apps and other tech

banks

Generally lags in new technology

credit unions

For-profit

banks

Not-for-profit

credit unions

Personal interactions less of a priority

banks

Local and personal engagement emphasized

credit unions

A certificate you purchase with cash which is payable to the receiver of it

Special Services Money Order