Investment and Financial Services Review

A collection of vocabulary flashcards covering key terms and concepts for Chapters 6 and 7, including investment types, risk and return metrics, and alternative financial services.

Liquidity

How easily you can access your money.

Savings account

A financial account with very low risk, high liquidity, and a small amount of interest.

Money market account

A low-risk, fairly liquid account that may allow limited check writing.

CD (Certificate of Deposit)

An account where money is locked in for a set term, usually offering higher interest, with a penalty for early withdrawal.

Stocks

An investment representing ownership in part of a company, offering higher potential return but higher risk and volatility.

Bonds

An arrangement where you lend money to a company or government and earn interest, generally carrying less risk than stocks.

Mutual funds

A collection of investments managed by professionals where diversification lowers overall risk.

Traditional IRA / 401(k)

Retirement accounts where contributions are generally pretax and taxes are paid when funds are withdrawn.

Roth IRA

A retirement account where money is taxed before contributing, making qualified withdrawals tax-free.

Diversification

Spreading investments out to reduce risk.

Volatility

How much an investment's value changes.

Principal

The original amount of money invested.

Return

The money earned from an investment.

Load

A fee charged by some mutual funds.

Person-to-person (P2P) lending

An arrangement where individuals lend money directly to other individuals using online marketplaces without requiring a traditional bank.

Payday lender

A service that gives small, short-term loans (usually around $100–$300 for about 2 weeks) until your next paycheck, often with extremely high interest rates (300–800%) that can create a cycle of debt.

Pawnshop

A service that gives a small loan using an item as collateral; if you do not repay, the pawnshop can keep or sell the item.

Auto title lender

A service that gives a loan using your vehicle as collateral, where you keep the car while the lender holds the title, and failure to repay can lead to repossession.

Check-cashing outlet

A facility that cashes payroll, personal, and government checks for a fee, which is about 10% of the check in the material.

Money order

A payment method similar to a check where money is paid upfront, making it useful for those without a bank account and more trusted than a personal check.

Prepaid card

A card loaded with money before use that is neither a credit card nor a debit card, with spending drawn directly from the prepaid account.

Rent-to-own

An arrangement allowing you to get an item and pay through installments while renting it until it is completely paid off, which usually costs more overall than buying outright.