Stocks/Bonds Review

When purchasing stock, a person should be aware that:

• Once a person buys the stock, he must hold that stock until retirement

• There is no guarantee that the price of the stock will go up

• The Securities and Exchange Commission (SEC) charges stockholders an annual fee based on the number of shares of stock he owns

• Buying shares of stock in different companies rather than in one company increases risk

What is a good strategy to build wealth for the future?

• Pay for goods and services using credit cards

• Pay bills when received and use a checking account

• Deposit money into both savings and investment accounts each month

• Have paychecks automatically deposited into a checking account

A person investing 3% of a $31,000 salary each year in a 401(k) starting at age 25 will have much more money at age 70 than someone who waited until age 50 to invest 3% each year of a $55,000 salary. Why is this true?

• Because of inflation, the money will be worth more at retirement

• The interest rate earned by a 25 year old is greater than the interest rate earned by a 50 year old

• Investments provided to a 25 year old are better than those provided to a 50 year old

• The invested money has had a longer period of time to benefit from compounding and investment gains

Why do many investors prefer to buy stocks that pay dividends?

• The stock price will not change

• The price is generally lower

• They are allowed to buy company products at a discount

• They receive quarterly payments from the company during the year

When the stock market has been rising and investors are confident, expecting stock prices to continue rising, it is described as a

• Bear Market

• Bull Market

• Puppy Market

• Stable Market

A public corporation announced today that it lost a major lawsuit. As a result, it is most likely that the

• Price of their stock will increase

• Price of their stock will decrease

• Corporation will issue more stock

• Corporation will expand its business

Mutual funds are:

• An investment portfolio managed by the investor

• An investment that holds a wide range of different investment instruments, providing diversification

• Usually less risky than investing in a money market

• Guaranteed to increase in value

A bank Certificate of Deposit is a:

• Stock option for new companies

• Bond issued by the federal government

• Savings instrument that requires a deposit for a period of time during which there is a penalty for withdrawals

Who regulates the stock market?

• Securities and Exchange Commission (SEC)

• Internal Revenue Service (IRS)

• Department of Homeland Security (DHS)

Stocks represent ownership in a corporation.

• True
• False