Exam 16: Managing Finances

The ________ is the federal government agency that regulates U.S.securities markets.

Negative ratings do not necessarily keep issues from being successful.Rather,they raise the interest rates that issuers must offer to attract lenders.

An investment bank operates in the secondary securities market.

Animal names have figured prominently in the stock market for years.Which animal listed below do we associate with a falling market?

What do angel investors receive in return for their investment?

Why were Freddie Mac and Fannie Mae created?

Explain the difference between angel investors and venture capital.

The ________ is the government regulatory agency charged with protecting the investing public.

The American Stock Exchange (AMEX),located in New York City,is the largest exchange.

Book-entry ownership replaces paper stock certificates.

Stock brokers earn commissions from the individuals and organizations for whom they place orders.

A mutual-fund portfolio is expected to depreciate in market value and otherwise produce a loss for the fund and its investors.

The New York Stock Exchange is one of the smaller exchanges.

Describe the advantages of ETFs.

Short Case Scenario 16-1 Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Before the day ends,Jessica has one more family member ask her for advice.Candy,who has always been the "black sheep" of the family,corners Jessica and pleads,"Jessica,help me.I'm in desperate need of your advice." Candy goes on to explain that she recently got news from a coworker that their company was about to announce a major new discovery.The coworker advised Candy that the stock price would skyrocket when the news became public.Candy hurried to the phone and asked her broker to buy 100 shares of stock in the company.Candy was initially delighted when the stock price rose sharply and she was able to sell her shares for a big profit.Now,Candy finds that there's discussion in the office that she may have broken the law.What should Jessica tell Candy?

When making an initial investment of $10,000,the gains for the last 10 years are much greater than for the first 10 years illustrating the ________ .

Short Case Scenario 16-1 Jessica is looking forward to a family reunion at the beach. She is the first in her family to have graduated from college. She started her studies at the local community college and transferred to a prestigious private college several hours from her family's home. Jessica's major in college was business administration with a concentration in finance. As she approaches the beach house where her family will be staying, Jessica is glad that her days of being quizzed and tested are over. She is looking forward to an opportunity to relax and to put her brain on "pause." However, Jessica's family has other plans for her. Almost before she emerges from her car, the questions begin. Jessica's great-aunt Irene is hoping for a little investment advice. Irene explains, "One of my CDs has recently matured and I'm hoping to roll it into an investment where I might make a little more interest. Your cousin Eddie has suggested that I invest in bonds, but I'm not sure what to think. You know, dear, Eddie's never been very bright and I'd be foolish to take his advice without a little more information. -Hearing Jessica's advice,her cousin Vinnie chimes in,"If I were you,I'd go with junk bonds - that's where the money is!" How should Jessica react to this advice?

Initial public offerings (IPOs)are the first sale of a company's stock to the general public and are a major source of funds that fuel continued growth for many firms.

Why are there such differences in stock share prices?

Stock brokers do NOT ________.