| A | B |
|---|
| Rate of Return | The income earned from an investment divided by the amount of the investment. |
| Compound Interest | Interest that is not only earned on the principal but also on the interest already earned. |
| Opportunity Cost | What you give up in order to get something else--the next best alternative. |
| Incentive | A reward that influences choices. |
| Income | The money a person earns during a particular time period, often one year. |
| Wealth/Net Worth | The amount of money a person accululates, or total assets minus total liabilities. |
| Rule of 72 | A rule for determining how long it takes money to double at a particular rate of return. |
| Financial risk | The risk that a business or government will not be able to return your money. |
| Market price risk | The risk that the price of an investment will go down because of supply and demand. |
| Liquidity risk | The risk that an investment will be difficult to turn into cash. |
| Real Rate of Return | The rate of return from an investment after adjusting for inflation. |
| Fraud risk | The risk that an investment has been misrepresented. |
| Nominal rate of return | The rate of return from an investment before adjusting for inflation. |
| Passbook savings account | A federally insured account at a bank, savings and loan, or credit union from which you can withdraw your money at any time. |
| Certificate of Deposit | A type of savings deposit that you must leave in a bank for a specified period of time. |
| U. S. Savings Bond | A U. S. Government Bond that you can invest in for as little as $50. |
| Annual rate of return | The additional money earned on an investment in percentage terms for a year. |
| Inflation | A general rise in the price level. |
| Money Market Mutual Fund | A mutual fund that includes loans to businesses and governments for short periods of time. |
| Stocks | Shares of ownership in a corporation. |
| Stock Mutual Fund | A mutual fund that has more risks and more potential rewards. |
| Real Estate | Buying a home is an example of this type of investment |
| Inflation Risk | The risk that the real value of your investment will decrease because of a rise in the price level. |
| Risk/Reward Ratio | The greater the risk, the greater the potential reward. |
