Name that company

Born 150 years ago, today I boast more than $300 billion in assets and more than 5,400 locations offering financial services such as insurance and estate planning. I was one of the few companies to maintain regular dividend payments throughout the Great Depression. In 1960, I introduced automated teller machines, and I now feature more than 6,000 of them in 23 states. In 1967, three other banks and I introduced Master Charge, now known as MasterCard. In 1995, I was the first U.S. financial services company to launch Internet banking services, and in 1998 I merged with Norwest. Who am I? (Answer: Wells Fargo)

Know the answer? Send it to us with Foolish Trivia on the top and you’ll be entered into a drawing for a nifty prize! The address is Motley Fool, Box 19529, Alexandria, Va. 22320-0529. Send questions for Ask the Fool, Dumbest (or Smartest) Investments (up to 100 words), and your Trivia entries to Fool@fool.com.

Rule of 72

Can you explain what the “Rule of 72” is? Elizabeth Easterly, of Ms.Younger’s seventh-grade class at Annunciation Orthodox School in Houston

It’s a rule of thumb you can use to figure out how long it will take for your money to double at various rates of growth. Imagine that your money is earning 5 percent in interest annually. Take 72 and divide it by 5 and you’ll get 14.4, meaning that it will take roughly 14 1/2 years for you to double your money. If you’re earning 10 percent interest (lucky you!), you’ll double your money in about 7.2 years.

The rule’s results aren’t precise, but they’re pretty close for interest rates up to about 15 percent and aren’t too far off even at 25 percent.

The rule also works in reverse. If you want to double your moolah in six years, just divide 72 by 6 and you’ll see that you’ll need an average growth rate of roughly 12 percent.

It’s terrific that you’re interested in financial matters at such a young age. The earlier you begin investing, the more money you can ultimately make. Learn more at www.themint.org and www.Fool.com/teens.

Are the financial statements found on various companies’ Web sites required to be audited? Renee Bartoe, via e-mail

Yes and no. Companies are required to report on their earnings and financial condition quarterly. Once a year they issue comprehensive 10-K reports, along with their annual report. In the intervening quarters, they issue less substantial 10-Q reports. 10-K reports include details on the company’s recent performance, competitive position, risks and more, and the financial statements in them are audited. 10-Q reports, on the other hand, are not required to be audited.

Bad fortune

My horoscope prognosticated: “You will receive insider information today.” Around 11 p.m., my father-in-law called and said, “I have some inside information for you.”

He explained that the company he worked for was about to go public and I could buy stock in the firm before it did. I bought 10,000 shares. Later, I thought: “What am I doing? I have just been touched by divine information.” I tripled my investment. The company never went public, and I now own a bunch of worthless stock. The moral? When reading your horoscope, never invest unless it states you will receive GOOD insider information. Chris Kysar, El Verano, Calif.

The Fool Responds: Before you invest in any company, you should do some research and have a good handle on its financial and competitive condition. This can be hard to do with private companies. With public companies that have been around a while, you have years of financial statements to review. Remember a balance sheet may tell the future better than a horoscope.

A mini-glossary on investing

Here are definitions for some common investing terms.

Asset allocation: Dividing investment dollars among various asset classes typically among cash investments, bonds and stocks to reduce risk and best match your goals, time horizon and temperament.

Basis (or cost basis): The total amount paid by an investor for a security. It’s used, together with the proceeds from the sale of the security, to calculate capital gains for tax purposes.

Compounding: When an investment generates earnings on reinvested earnings, resulting in exponential growth over time.

Convertible security: A preferred stock or corporate bond that can be exchanged for shares of the company’s common stock at a specified price or rate.

Equities: Equities are just shares of stock. Because they represent a proportional share in a business, they are equitable claims on the business itself.

Initial public offering (IPO): A company’s first offering of common stock to the public.

Over-the-counter (OTC): A geographically decentralized market in which stock and other securities transactions are not conducted in person as on the much-televised floor of the New York Stock Exchange but through a telephone and computer network. The OTC market is regulated by the National Association of Securities Dealers (NASD).

Secondary offering: When a company offers a large block of stock for sale anytime after its initial public offering.

Secondary market (or aftermarket): This is what we usually refer to when we use the words “the market.” It’s the market in which stocks and other securities are traded after they are initially offered. The New York Stock Exchange, the Nasdaq stock market, the bond markets and so on are all secondary markets, where you’re buying from other investors, not from the companies or entities that issued the securities.

Securities: A fancy name for shares of stock or bonds, “securities” is just a way to refer to any kind of financial asset that can be traded.

Underwriter: An investment bank or brokerage that helps a company raise money by executing an initial public offering or secondary offering of its stock.

Learn more at www.investorwords.com.