Personal Finance Essay

406 WordsDec 18, 20142 Pages
Section 4 Study Questions Lesson 1 What is a money market account? A money market account invests your money in low risk investments with predictable interest rates. What is simple interest? Simple interest is interest gained only on the principal amount of an account. What is the time value of money? The time value of money is the assumption that money is worth more the sooner it is received. If you receive money today, you can put it into an account that offers interest and start earning interest on that money right away. Lesson 2 What is investing? Investing is when you give your money, time, or energy to something in order to get a reward in the future—usually a financial reward. What is diversification? Diversification is an investment strategy in which you spread out your investments among many different types. What are equity investments? Equity investments are investments in the ownership of something, such as a company or real estate, with the hope that the investment will increase in value and be worth more at some future date. Lesson 3 What are stocks? Stocks are popular type of equity investment in which you can buy partial ownership of a company in a tiny fractional amount called a share. Stocks are often called equities. What is fraud? Fraud is illegal, dishonest behavior by an individual or company. What is microfinance? Microfinance is providing loans or other financial services to low-income individuals or small groups who can’t access banks or wouldn’t qualify for loans. The borrowers use these loans to fund small business ideas, which ideally helps them escape poverty. Lesson 4 What is a 401(k) account? A 401(k) plan is a common type of retirement account. 401(k) plans are offered by businesses or companies to their employees. Employees can invest part of their income into a traditional 401(k)

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