16. What is the most important thing about stocks to an investor who is interested in capital gains?

the price at which they can be resold

23. Stock indexes are best at

providing an overall view of the stock market's health

15. One helpful guideline for investing is that

the longer you have to invest, the more risk you can take

12. Diversification means that an investor

makes several different types of investments to minimize risk

29. The biggest risk associated with long-term CDs is

losing out on interest if rates go up

19. Stock prices are determined by

the market forces of supply and demand

8. One advantage money markets have over capital markets is that

depositors' money is tied up only for a year or less

28. The main element of risk associated with investing in bonds involves the likelihood that the

issuer will be able to repay the loan

4. One of the biggest advantages of a mutual fund is that it

allow individual without a lot of money to own a variety of financial asset

1. The difference between savings and investments is that

investments are savings that are put to use

9. Before choosing among investment options, an investor should

determine an investment objective

18. It is most appropriate to invest in the stock market when you need

to earn a lot and have a long time to do so

3. Economic investment differs from personal investment in that economic investment

specifically refers to money lent to businesses

13. In general, people put money in risky investments because

such investments often earn the greatest profits

30. When an investor wants to withdraw money from a CD before the maturity date,

he or she will lose interest and perhaps some of the principal

17. What is the economic tradeoff involved in buying preferred stock?

receiving guaranteed dividends but no voting rights

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EC Chapter 11 Stock Market

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Answers

1
16. What is the most important thing about stocks to an investor who is interested in capital gains?
the price at which they can be resold
the amount of the dividends
the initial public offering
the right to vote for the board of directors
2
23. Stock indexes are best at
pinpointing the hot new stocks to buy
predicting how fast stock prices will rise
warning investors when to sell their stocks
providing an overall view of the stock market's health
3
15. One helpful guideline for investing is that
the longer you have to invest, the more risk you can take
if you have a low income, you must worry about tax liability first
the less time you have to invest, the more risk you should take
you should invest in stocks before paying off credit card debt
4
12. Diversification means that an investor
invests in stock from a variety of corporations
diverts all his or her funds to corporate bonds
makes several different types of investments to minimize risk
buys stock on several stock exchanges in case one crashes
5
29. The biggest risk associated with long-term CDs is
loss of investment if the stock market fails
losing out on interest if rates go up
embezzlement of funds that are left in the account too long
loss of principal if the bank fails
6
19. Stock prices are determined by
the valuation made by corporate auditors
the ruling of the Securities and Exchange Commission
the market forces of supply and demand
price fixing by workers at the stock exchanges
7
27. What is the common name for high-risk, high-yield bonds issued by corporations?
investment bonds
junk bonds
corporate bonds
municipal bonds
8
8. One advantage money markets have over capital markets is that
they offer higher rates of return
assets can be redeemed only by the original buyer
assets can be resold easily
depositors' money is tied up only for a year or less
9
14. One investment that is considered almost risk free is
common stock
preferred stock
U.S. government bonds
corporate bonds
10
28. The main element of risk associated with investing in bonds involves the likelihood that the
purchaser will be able to resell the bonds
issuer will be able to repay the loan
interest rate in the market will rise overall
purchase price will rise
11
26. What advantage do most municipal bonds have over other investments?
shorter maturity dates
higher par value
tax-free interest
FDIC insurance
12
4. One of the biggest advantages of a mutual fund is that it
is traded on the NASDAQ rather than the New York Stock Exchange
allow individual without a lot of money to own a variety of financial asset
allows individuals to move investments from money markets to capital market
specializes in the stock of companies on the Dow Jones Industrial Average
13
22. Which of the following is a stock index based on the stocks of 30 major companies?
Standard and Poor's 500
Dow Jones Industrial Average
NASDAQ composite
Hang Seng index
14
1. The difference between savings and investments is that
savings are investments that are put to use
savings earn money while investments do not
investments are savings that are put to use
investments earn money while savings do not
15
9. Before choosing among investment options, an investor should
hire a financial analyst
read a financial newspaper
consult a stockbroker
determine an investment objective
16
6. When a borrower fails to pay back a car loan, the bank
seizes the borrower's house
charges compound interest
files criminal charges
repossesses the car
17
7. The two categories used to classify financial asset markets are
resalability and diversity
risk and diversity
time and risk
time and resalability
18
25. Bonds that are issued by state and local governments are called
municipal bonds
junk bonds
investment bonds
internal bonds
19
10. Two issues that play a role in choosing the right investments to meet a financial goal are
time and income
time and interest
income and liquidity
interest and liquidity
20
2. An institution that helps to bring savers, borrowers, and financial assets together is a
financial market
secondary market
primary market
financial intermediary
21
11. The most important thing to consider when saving for emergencies is
rate of return
deposit insurance
taxation
liquidity
22
18. It is most appropriate to invest in the stock market when you need
to earn a lot and have a short time to do so
to earn a lot and have a long time to do so
to earn a small amount but you have no money to risk
to earn a small amount but cannot risk your investment
23
3. Economic investment differs from personal investment in that economic investment
is investment by the government, not individuals
specifically refers to individuals putting their money in savings
is investment in assets held by the government
specifically refers to money lent to businesses
24
20. The right to buy or sell stock at a future date for a preset price is a(n)
future
option
contract
bid
25
13. In general, people put money in risky investments because
they can take a tax deduction if they lose money
no other investments are available at the time
they receive bad advice from a financial analyst
such investments often earn the greatest profits
26
5. Which of the following is a nonbank financial intermediary?
finance company
savings and loan
commercial bank
credit union
27
30. When an investor wants to withdraw money from a CD before the maturity date,
the bank will reduce the coupon rate
he or she will lose interest and perhaps some of the principal
the bank will refuse to allow it
he or she can withdraw partial funds without penalty
28
24. The interest rate that a bondholder receives every year until the bond matures is called the
coupon rate
bond rating
mature value
par value
29
21. Over-the-counter traders in the United States are most likely to use the
NASDAQ
FTSE
AMEX
NYSE
30
17. What is the economic tradeoff involved in buying preferred stock?
receiving guaranteed dividends but no voting rights
receiving a share of ownership but no dividends
receiving voting rights but no dividends
receive voting rights but no share of ownership

EC Chapter 11 Stock Market Flashcards | StudBud