Download Obj. 5 Vocabulary

Obj. 5.01 & 5.02 Vocabulary
1. Compound interest - Earning interest on interest
2. Consumption - The purchase of goods and services
3. Do it yourself - When you complete a task yourself rather than paying someone else
4. Emergency savings - Cash set aside to cover the cost of unexpected events
5. Interest - Price paid for using someone else’s money
6. Interest rate - Percentage rate used to calculate interest
7. Liquidity - How quickly and easily assets can be accessed and converted into cash
8. Pay yourself first - Saving for the future by putting money aside before paying regular monthly
bills or using income for discretionary purchases
9. Principal - The original amount of money saved or invested
10. Saving - Accumulation of excess funds by intentionally spending less than you earn
11. Savings - Portion of income not spent on consumption
12. Time value of money - Money available at the present time (today) is worth more than the
same amount if received in the future
13. Certificate of deposit - An account at a depository institution that is used for a fixed period of
time and allows restricted access to the funds deposited
14. Checking account - An account that allows quick access to funds for transactions
15. Depository institution - Businesses that provide financial services
16. Liquidity - How quickly and easily an asset can be converted into cash
17. Money market deposit account - A account at a depository institution that usually has minimum
balance requirements and tiered interest rates
18. Savings account - An account at a depository institution that is designed to hold money not
spent on current consumption
19. Savings tools - Accounts offered by depository institutions whose main purpose is to help people
manage their money
20. Tiered interest rate - The amount of interest earned depends on the account balance
21. Bond - A form of lending to a company or the government (city, state, or federal)
22. Brokerage firm - Facilitates the buying and selling of investments from a stock exchange
23. Capital Gain - Unearned income received from the sale of an asset above its purchase price
24. Discount brokerage firm - Only completes orders to buy and sell investments
25. Dividend - The share of profits distributed in cash
26. Financial advisor - A trained professional that helps people make investing decisions
27. Full‐service brokerage firm - Offer investment transactions as well as investment advice and a
financial advisor
28. Index - A group of similar stocks and bonds
29. Index fund - A mutual fund that was designed to reduce fees by investing in the stocks and
bonds that make up an index
30. Inflation - The rise in the general level of prices
31. Inflation risk - The danger that money won’t be worth as much in the future as it is today
32. Investment - Assets purchased with the goal of providing additional income from the asset itself
but with the risk of loss
33. Investment philosophy - An individual’s general approach to investment risk
34. Investment risk - The possibility that an investment will fail to pay the expected return or fail to
pay a return at all
35. Market price - The current price that a buyer is willing to pay
36. Maturity date - The specified time in the future when the principal (or initial investment)
amount of the bond is repaid to the bondholder
37. Mutual fund - Created when a company combines the funds of many different investors and
then invests that money in a diversified portfolio of investments
38. Portfolio diversification - Reduces risk by spreading money among a wide array of investments
39. Rate of return - The total return on an investment expressed as a percentage of the amount of
money saved
40. Rent - A fee charged for the use of property or land
41. Return - The profit or income generated by saving and investing
42. Risk - The chance of loss from an event that cannot be entirely controlled
43. Speculative investments - Have the potential for significant fluctuations in return over a short
period of time
44. Stock - A share of ownership in a company
45. Stockholder or Shareholder - The owner of a stock
46. Stock exchange - An organized, central service to buy and sell stocks, bonds and other
investments that are traded
47. Tax‐advantaged investments - Reduce, defer, or adjust the current year tax liability