AP®︎ Business with Personal Finance: Topic 5.3 Flashcards

Connecting present saving, investing, and spending decisions to the costs, deadlines, risks, and priorities of future goals

Saving uses relatively safe, liquid assets for stability and near-term needs; investing accepts more risk for greater potential long-term growth

The length of time before money will be needed for a financial goal

An arrangement that regularly transfers a specified amount into a savings or investment account

An automatic transfer of part of each paycheck directly to an account, such as an employer-sponsored retirement plan

Setting aside money for saving or investing before using income for other spending

Education or training pursued after high school

The full cost of education, including tuition, housing, food, fees, books, supplies, transportation, and possible forgone earnings

The full cost of attendance minus grants and scholarships that do not have to be repaid

Education funding that generally does not require repayment and is often awarded for merit or other eligibility criteria

Education funding that generally does not require repayment and is often based on financial need or program requirements

A program through which an eligible student earns money by working while enrolled

Both finance education and require repayment, but federal loans may have lower rates, better repayment terms, and more borrower protections than private loans

A federal student loan for which the government pays interest during specified periods when the borrower is not responsible for it

Renting generally offers flexibility and lower initial costs, while buying can build equity but requires more money upfront and adds ownership costs

The portion of a home's purchase price paid from the buyer's savings rather than borrowed through a mortgage

A loan secured by a home and used to finance the portion of its purchase price not covered by the down payment

A mortgage whose stated interest rate remains unchanged for the loan term, making principal-and-interest payments predictable

A mortgage whose interest rate can change according to its terms, causing future payments to rise or fall

Planning when to reduce or stop work and how retirement expenses will be funded from Social Security, employer plans, investments, and possible earnings

A workplace retirement plan that commonly accepts employee contributions through payroll deduction and may include employer contributions

Providing one-time, recurring, or legacy support to nonprofits whose missions and impact align with the donor's goals

A charitable gift arranged through an estate or another long-term plan to support an organization after the donor's death

An eligible amount that reduces taxable income rather than reducing the tax bill dollar for dollar

A generally liquid, interest-paying deposit account that may be federally insured and usually offers a low expected return

A deposit held for a stated term that generally pays a specified interest rate; eligible CDs are federally insured, and early withdrawal may incur a penalty

An ownership interest in a business that may provide dividends and capital gains but can lose value with the business or market

An asset representing money lent to an issuer that promises payments according to the bond’s terms, generally including interest and repayment of principal

A pooled investment that uses money from many investors to hold a portfolio of stocks, bonds, or both

The possibility that an investment's actual return will differ from its expected return, including the possibility of loss

The return anticipated from an asset based on its characteristics and available information, not a guaranteed result

Lower-risk assets generally offer lower expected returns, while higher expected returns usually require accepting more uncertainty and potential loss

The ease and speed with which an asset can be converted to cash without a substantial loss in value

An individual's or household's willingness to accept uncertainty, fluctuations, and possible investment losses

Growth that occurs when returns remain invested and earn additional returns along with the original principal

A charge for buying or selling a financial asset that reduces the investor's return

A charge for operating and managing a pooled investment such as a mutual fund

A charge paid for professional investment advice or portfolio management

A discount firm generally charges lower fees and provides less individualized advice; a full-service firm generally provides more advice and services and charges more

A payment received for the use of money

A distribution made by a business to its shareholders

The gain that occurs when an asset is sold for more than its cost

Nominal return is unadjusted for inflation; real return measures purchasing-power growth, exactly: real return = (1 + nominal return)/(1 + inflation rate) − 1

A bias in which investors overestimate their knowledge or predictive ability, encouraging excessive risk, trading, or concentration

A bias in which the pain of a loss outweighs the benefit of an equal gain, potentially causing premature selling during declines

The division of a portfolio among categories such as savings and cash, bonds, and stocks

Allocating money among varied assets, issuers, or industries to reduce dependence on any one investment without eliminating all risk

A standard, such as an appropriate stock or bond index, against which an investment's performance is evaluated

A professional who helps evaluate saving and investment options and should be assessed by licensing, certifications, education, experience, services, and cost

A reduction in money’s purchasing power over time that lowers an investment’s real return

A person or firm investors use to purchase stocks and bonds