Chapter 13: Investing Fundamentals - DONE

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1. 13-4 and 13-5 11. Global Global investments must be evaluated just like
Summary - Investment domestic investments. But evaluating foreign
too obvious Risk firms and global mutual firms may be difficult
:Components because reliable accounting and financial
of the Risk information on foreign firms is often scarce.
Factor -5
12. Government The written pledge of a government or a
probably wont even have know Bond municipality to repay a specified sum of
2. Approximate money, along with interest.
Market Value 13. Inflation Risk Financial return on an investment will not
:Components keep pace with the inflation rate.
of the Risk
pic.
Factor -1
3. Asset
14. Interest Rate
Allocation
Risk
:Components
The process of spreading your assets among of the Risk
several different types of investments (asset Factor -2
classes) to lessen risk. If rates rise, value of asset held decreases. If
rates decrease, value of asset held increases.
Pic- facts that were on the quiz
Pic= Bond Interest Calculation
4. Business The increase and decrease in a nation's
Cycle economic activity. 15. Investment
Alternatives
5. Business The risk of business failures associated with
Comparison
Failure Risk investments in stock, corporate bonds, and
Chart
:Components mutual funds that invest in stocks or bonds.
of the Risk With each investment, you face the possibility
Factor -3 that bad management, unsuccessful products,
competition, or a host of other factors will
cause the business to be less profitable than
originally anticipated. pic

6. Corporate A corporation's written pledge to repay a 16. Investment Investments will increase in value over time.
Bond specified amount of money, along with Growth Companies with better than average earnings
interest. potential, sales revenues that are increasing,
and managers who can solve problems
7. Dividend A distribution of money, stock, or other
associated with rapid expansion are often
property that a corporation pays to
considered to be growth companies. Think
stockholders.
biotech or tech companies.
8. Economics Study of how wealth is created and
17. Investment Steady stream of cash flows. Choose
distributed.
Income municipal bonds, corporate bonds, preferred
9. Emergency An amount of money you can obtain quickly stocks, utility stocks, or selected common
Fund in case of an immediate need. Recommended stock issues.
3-9 months of living expenses.
18. Investment The ability to buy or sell an investment quickly
Liquidity without substantially affecting the investment's
The money should be put in a savings account
value. Checking and savings accounts are
with the highest interest rate possible.
very liquid, while assets such as real estate are
10. Equity Money that a business obtains from its not.
Capital owners.
19. Line of A short-term loan that is approved before you
Credit actually need the money. Cash advance
provisions on credit cards are another option.
20. Market Risk - Systematic Occurs because of overall risks in the market and the economy. Factors such as an economic crisis,
:Components of the Risk increasing interest rates, changes in consumer purchasing power, and wars all represent systematic
Factor -4 risk.
21. Market Risk - Unsystematic Affects a specific company or a specific industry. This type of risk can be reduced by diversifying an
investment portfolio.
22. Maturity Date The date on which a corporation, government, or municipality will repay the borrowed money.
23. Mutual Fund Pools the money from many investors - its shareholders - to invest in a variety of securities.
24. Rate of Return

The total income you receive on an investment over a specified period of time divided by the
original amount invested.

kinda obvious-pic
25. Risk Return Trade off -
CHART

pic.
26. Speculative Investments A high risk investment made in hope of earning a large profit in a short time.
27. Typical Investment Pyramid
and their relative Risk

pic.