Test 11

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

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