Exam 14: Investing Fundamentals

Smart investors can find investments that generate high rates of returns with small amounts of risk.

The standard deviation of a stock's monthly returns measures the degree of volatility of a stock's returns over time and can be a method of evaluating a stock's future risk.

Use the following two columns of items to answer the matching questions below: -stock exchanges A)first offering of a firm's stock to the public B)facilities that allow investors to purchase or sell existing stocks C)investors owning this type of stock have priority over common stockholders in receiving dividends D)market where existing securities are sold E)individual investors who buy and sell stocks within a day F)financial instruments that represent partial ownership of a firm G)debt instruments issued by the government or corporations to borrow money from investors H)professionals responsible for clients' funds

An investment that has the potential to rise substantially in value also has the potential to decline substantially in value. If you cannot afford the possible loss, you should not make that investment.

If you have a 6% student loan and a 10% student loan, and can invest at 5% without risk, in what order should you allocate funds?

Describe how the decision to invest in stocks affects financial planning, liquidity management, financing, and protecting your wealth.

The market for newly issued securities and initial public offerings (IPOs) is the ________ market.

Bonds are financial instruments representing partial ownership of a firm.

Which of the following are not factors that may impact the return on stock or bond investments?

What would be the annual compound return on a stock purchased at $20 per share, held for 5 years, and sold for $32.22? Ignore brokerage commissions and tax implications and assume the stock paid no dividends during the holding period. Round to the nearest whole percent if necessary.

Regarding dividends paid on common stock,

The stocks of well-known companies are referred to as "preferred stock."

One difference between common and preferred stock is that preferred stock

When economic conditions are strong, the demand for most types of investments is low.

Use the following two columns of items to answer the matching questions below: -bonds A)first offering of a firm's stock to the public B)facilities that allow investors to purchase or sell existing stocks C)investors owning this type of stock have priority over common stockholders in receiving dividends D)market where existing securities are sold E)individual investors who buy and sell stocks within a day F)financial instruments that represent partial ownership of a firm G)debt instruments issued by the government or corporations to borrow money from investors H)professionals responsible for clients' funds

It is better to pay off low interest loans and then invest, versus paying off loans with higher interest rates.

Dividends are a portion of

Individuals who buy and sell stock on a very short-term basis as a career are called ________.

Use the following two columns of items to answer the matching questions below: -preferred stock A)first offering of a firm's stock to the public B)facilities that allow investors to purchase or sell existing stocks C)investors owning this type of stock have priority over common stockholders in receiving dividends D)market where existing securities are sold E)individual investors who buy and sell stocks within a day F)financial instruments that represent partial ownership of a firm G)debt instruments issued by the government or corporations to borrow money from investors H)professionals responsible for clients' funds

Since the gain received from the sale of stock is always taxed as ordinary income, you might want to time your sale to shift your profit from one year to another.