Unit 3 Terms

What is the process of distributing resources, such as capital or investment funds, among various assets or projects to optimize returns or minimize risk called?

• Allocation

• Diversification

• Investment

• Budgeting

What is the process of spreading out a loan into a series of fixed payments over time, where each payment covers both interest and principal?

• Amortization

• Capitalization

• Depreciation

• Inflation

What does APR stand for in financial terms?

• Annual Payment Rate

• Annual Percentage Rate

• Annual Profit Rate

• Annual Principal Rate

What does the APR include in its calculation?

• Only the principal amount

• Only the interest rate

• Any fees or additional costs associated with the transaction

• Only the investment returns

How is the APR expressed?

• As a fraction

• As a percentage

• As a decimal

• As a ratio

What is an annuity?

• A financial product that provides a series of payments made at equal intervals.

• A type of savings account with high interest rates.

• A loan that must be repaid in monthly installments.

• A stock investment with variable returns.

What is a common use of annuities?

• To secure a steady cash flow during retirement.

• To pay off student loans.

• To invest in real estate.

• To purchase luxury items.

What is an Adjustable Rate Mortgage (ARM)?

• A mortgage with a fixed interest rate

• A mortgage where the interest rate is periodically adjusted based on a specified index

• A mortgage with decreasing monthly payments

• A mortgage with no interest rate

What does the term "capital" refer to?

• The financial assets or resources used for investment, production, or increasing wealth.

• The total amount of money a person earns in a year.

• The number of employees in a company.

• The physical location of a business.

Which of the following can be included as capital?

• Funds held in deposit accounts and physical assets like property.

• The number of products a company sells.

• The amount of taxes a business pays.

• The number of shareholders in a company.