Exam 20: B: Understanding Personal Finances and Investments

The Securities Act of 1933 requires that investors have full access to all important facts about stocks, bonds, and other securities so that they can make informed decisions.

A high-risk investment is made in the uncertain hope of earning a relatively large profit in a short time span.

One of the primary reasons to begin investing when you are young is that your investments have more time to work for you.

The interest paid on bank accounts can be withdrawn to serve as income, or it can be left on deposit to provide growth.

Today, most corporations, investment companies that sponsor mutual funds, and federal, state, and local governments have a home page where investors can obtain valuable investment information.

Asset allocation is the process of spreading your money among several different types of investments to lessen risk.

Generally, small cash dividends or no dividends are received from an investment in a corporation that is in the process of growing.

The net asset value per share is equal to the current market value of a mutual fund's portfolio minus the mutual fund's liabilities, divided by the number of outstanding shares.

Your age should be taken into account when determining which investments are right for your investment portfolio.

Bonds issued by municipal government units do not need to be evaluated.

Selling short is a term used to describe a situation in which an investor is selling stock he or she does not own but has borrowed from a brokerage firm and will repay at a later date.

A corporate bond with a face value of $1,000 is always worth $1,000.

Since stocks have greater returns than other investment alternatives, they are the logical choice for all investors.

In order to obtain a capital gain, you must sell your investment when the current market value is less than the amount you paid for the investment.

The purpose of portfolio management is to increase both risk and returns.

Stocks are a good way to satisfy the growth factor in personal investing.

For an investor, liquidity can be defined as the ease with which an investment can be converted into cash.

The corporation can force a convertible bondholder to convert the bond to common stock.

If the Federal Reserve has set the margin requirement at 50 percent, an investor can buy three times as many shares of stock by choosing to buy on margin.

A personal budget lists your assets and liabilities.