Economics Ch. 11 Pretest – Flashcards
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All of the following are examples of financial intermediaries EXCEPT?
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A stock certificate
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The main advantage of diversification as an investment policy is that it
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reduces risk to investors
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An accurate statement about bonds would be that
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they are usually a low-risk investment
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The interest rate the bond issuer pays to the bondholder is called the
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coupon rate
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Savings bonds differ from most other bonds in that
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the buyer does not receive periodic interest payments in exchange for a lower purchase price
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To finance the building of a new police station, a local government is most likely to issue a
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municipal bond
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Investing in a money market mutual fund is a higher risk than investing in a certificate of deposit because unlike CD's, money market funds
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are not insured by the FDIC
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An example of equity
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a share of stock
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An example of blue clip stock might be
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a large, well-known company traded on the NYSE
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The Dow Jones industrial average consist of
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30 stocks that are considered representatives of the market as a whole
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When you invest in a mutual fund
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you money is invested in a variety of stocks and bonds
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You do not have to pay state taxes on interest earned on
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treasury bills
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All of the following are low-risk investment EXCEPT
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junk bonds
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All of the following are basic components of bonds EXCEPT
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liquidity
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A stock split is most likely top occur when
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the price of a stock becomes too high
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A stock that reinvests its earnings in the business instead of paying regular dividends is called
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a growth stock
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The most trades are made
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on the New York Stock Exchange
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You borrow $500 from your parents to start a bagel delivery service to the hockey rink in the early mornings. you are acting as
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an entrepreneur
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Leslie puts this money in a savings account because her main priority is
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liquidity, since she'll need to use the money in a short time
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You lend $100 to your cousin Manny, who has a reputation for failing to pay back loans. You are taking a
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credit risk
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You want to invest but you are concerned because your neighbor has not had any business experiences. How can you offset your risk ?
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Ask for a higher interest rate
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Because you want to reduce the risk of losing all your savings if an investment fails, you decide to invest in?
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a mutual fund
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Since bonds are considered among the safest investments, you would expect that they would?
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have lower interest rate
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Why would a person invest in junk bonds
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junk bonds can pay very high interest rates
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Your friend Jorge has just inherited $1000 and would like to invest the money in the stock market. You suggest that he?
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contact a brokerage firm, who will put him in touch with a stockbroker
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Karen wants to buy stock, but is worried about the current "bear market". this means that
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many investors are selling their stocks in anticipation for lower profits
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The Great Crash can be attributed to all of the following reasons EXCEPT
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the small number of people buying stocks on margin
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You are a financial advisor whose client wants to stock that pays regular dividends. you advise him to buy
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income stocks
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You are a financial advisor whose client is concerned about losing his investment if a company goes out of business. you advise him to buy
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preferred stock
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You hear on the news that The Dow has fallen to just below 8000 points. this means that
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the Dow is relatively high levels compared to the early 1980s, but short of its all-time high.
