Investments Assignment 1

(Pages VI-D-5 to VI-D-7 in lesson 2)

1. What is an investment?

· when you buy something with the intention to have it

increase in value over time
· making your money work for you
2. What is the purpose of investing your money?

· to keep track of your money and have your money work for
you
· to make money as time passes
3. What are some important reasons to save and invest?

· you need to think about the future

· try to reach financial goals
· fund for emergencies
· to make sure you don't lose money to inflation
4. There are two basic categories of investments, debt and equity.
Explain the differences between these two types of investments.

michael

debt is investment where money is loaned

to borrowers and you earned interest on
the loan.

equity means that you have a stake in the

ownership of the venture.
5. For each of these investments provide a brief description and
state whether it is a debt investment or an equity investment.

a) Term deposits and Guaranteed Investment Certificate (GIC)

The interest is guaranteed and the money is usually

locked in until maturity.
b) Stocks

stocks it mean that it's part of owner of company

that people have to share to invest their money to
increase but if company does not do well, the value
must descreas
c) Bonds and Debentures

Debt, Are longer-term dept securities issued by different levels

of goverment and corporations. when they want to borrow
money. A bond holder receives a bond certificate that states the
terms of the issue and face value of the bond, the maturity date
and the interest rate.
d) Mutual Funds

*Mutual Funds are made up of a

group of selected stocks and
bonds.
e) Savings account

One of safest ways to save money by lending it

to a bank
f) Canada Savings Bonds

property of permanent nature for ex land and

buildings for most people investing in real estate
g) Real Estate

To own a property to
earn money renting it
to people.
6. List 4 important characteristics of investments and briefly explain
what each characteristic means.

Liquidity - The investment can be

converted into cash without loss of
principal.

Risk - The possibility of losing all or

part of your investment. Generally,
the greater the risk, the higher the
potential yield.

Inflation Risk - The possibility that

invested funds will lose purchasing
power.

Yield - The return on an investment,

expressed as a percentage.