Unit 2 vocabulary
Simple Interest: Interest earned on principle
a= prt
Compound Interest: Interest earned on principle and interest already invested a = p(1+r)n
2,000 (1+.1) 12
2,200
Rule of 72: Tells you how long it will take for your money to double by dividing 72 by the interest rate expected
Rate of Return: Interest rate earned on your principle expressed as a percentage
Yield: the amount the holder is paid each year for leaving his
or her money invested in that instrument.
Passbook Savings: Low
interest savings account very liquid and safe if insured.
Certificate of Deposit:
A savings account that gives you a fixed rate of return higher
than a passbook savings, but you must remain locked in for a fixed period of time.
Money Market: Insured
deposits with limited number of checks and withdrawals allowing bank to use your money as a short term loan.
Pension and Retirement Funds: Tax deferred retirement accounts
401(k) 403 (b) IRA’s
Stock: Buying ownership in a company
Corporate Stock: Ownership in this type of security allows you a voice in corporate decision making by voting.
Corporate Bonds: You are not buying into a company you are lending them money, you can receive dividends.
Mutual Funds: Diversifies your stock investments
with some possible fees and expenses
U.S. Savings Bonds: Loans to the U.S.
Government
Bonds: Loans in which
interest is paid at intervals, the principal is paid at end of loan period.
Bond Ratings: The high
the rating AAA the lower the interest rate and risk.
Common Stocks: Ownership in this type of security allows you a voice in corporate decision making by voting.
Preferred Stocks: Non
voting ownership in a company and preference when paying dividends or if corp. goes bankrupt.
Capital Gains: Money
earned by selling your stocks and must be reported to the IRS as income
Insider Trading: Making
a decision on buying or selling stock based on information that has not been made public
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AMEX
NASDAQ
OTC
