Segregated Funds and Annuities - Chapter 1: Investment and Savings Questions and Answers 100% Correct!

Segregated Funds and Annuities - ANSWER-Investment and savings products marketed to Indvidual and group prospects and clients Compounding - ANSWER-Usually refers to earning interest on an investment. Nominal Return - ANSWER-Stated or advertised rate. For example, a savings account is advertised with a 2% return. Real Return - ANSWER-Calculated as the nominal return on an investment minus the rate of inflation. Three main asset classes - ANSWER-Stocks (equities), bonds (fixed income or debt), and cash (money market instruments). Two other classes that are often added - ANSWER-Real estate and Commodities. Diversification - ANSWER-Manages risk. Combining asset classes and investments within those classes, investing risk will be lower and the expected overall returns may be higher than if savings were put into one investment. Diversified Instrument Example - ANSWER-Segregated Funds, Mutual Funds, and Exchange-Traded Funds (ETFs) Liquidity - ANSWER-The ability to cash in, or sell, an investment quickly at or near its current market price. Liquid Investment Example - ANSWER-Savings Account Illiquid - ANSWER-An investment that does not have characteristics of liquidity Illiquid Example - ANSWER-Real Estate Present Value Formula - ANSWER-PV = FV / (1 + i)^n Future Value Formula - ANSWER-FV=PV(1+r)^n Short term Objective - ANSWER-A goal to be met in 3 years or less