Test 11 – Flashcards
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An example of blue chip stock might be
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a large, well-known company traded on the NYSE.
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Investing in a mutual fund is a higher risk than investing in a certificate of deposit because unlike CDs, mutual funds
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are not insured by the FDIC.
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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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The main advantage of diversification as an investment policy is that it
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reduces risk to investors.
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All else equal, when people become more optimistic about a company's future,
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the demand for the stock (and thus the price) rises.
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A stock that reinvests its earnings in the business instead of paying regular dividends is called
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growth stock.
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All of the following are basic components of bonds except
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liquidity.
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All of the following are low-risk investments except
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junk bonds.
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When you invest in a mutual fund,
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your money is invested in a variety of stocks and bonds.
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The Dow Jones Industrial Average consists of
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30 stocks that are considered representative of the market as a whole.
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Which type of investment usually has the highest return?
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corporate stock
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If a bond from the franchise Greens Galore has a coupon rate of 5 percent, a par value of $2,000 and maturity of 5 years, how much total profit will you earn off your investment when it matures?
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$500
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High return on an investment is associated with
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high risk.
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What type of stock enables the investor to vote for the company's board of directors?
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common stock
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An advantage gained by the purchase of municipal bonds is that they
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generally are tax-exempt.
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An investor views a corporate bond as
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a financial asset generating future payments for the life of a bond.
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What is the most promising strategy for success that an investor can follow?
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Invest consistently over long periods of time.
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More money becomes available for economic growth when
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people save
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In most cases, savers who withdraw the money in a time deposit before the account's maturity date
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must pay a penalty fee.
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All types of bonds, whether they are savings bonds, Treasury bonds, or corporate bonds, are essentially
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loans.
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Stock splits usually occur when
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the price of stock has become so high that it discourages investors from buying shares.
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The most risk-free way to earn a return on money is to
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deposit it in a savings account.
