Investment Basics Flashcard

Front

What is the main function of financial intermediaries?

Back

To transfer money between savers and borrowers.

Front

What role do banks play in the financial system?

Back

Provide loans and facilitate investments.

Front

What is the formula for calculating simple interest?

Back

A = P(1 + rt)

Front

Why is diversifying investments important?

Back

Reduces risk and potential losses.

Front

What does the coupon rate of a bond represent?

Back

The interest rate paid to the bondholder.

Front

What is an investment?

Back

An asset or item acquired with the goal of generating income or appreciation.

Front

What is the difference between saving and investing?

Back

Saving is setting aside money for future use, while investing involves using money to purchase assets for potential growth.

Front

What is a stock?

Back

A share in the ownership of a company.

Front

What is a bond?

Back

A fixed income instrument that represents a loan made by an investor to a borrower.

Front

What is risk in investing?

Back

The possibility of losing some or all of the original investment.