Stocks Vs. Bonds

A bond's interest rate is also called its

• principal

• coupon rate

• face value

• par value

A dividend is a distribution of a portion of a company's earnings

• True

• False

What is stock?

• An option to purchase something in the future at today's price

• A collection of investments sold as a package

• A loan an investor makes to a company or government that pays interest over time

• A share of ownership in a company

All of the following are ways to earn money as a stockholder EXCEPT:

• selling the stock at a lower value

• getting dividends

• selling the stock at a higher value

• stock splits

Why does a corporation issue bonds to the public?

• it wants to lend money and to collect interest on the loan

• it wants to borrow money and is willing to pay interest on the loan

• it wants to decrease the price of its stock

• it wants to increase the price of its stock

What is the primary reason for a company to issue stock?

• To raise money to grow the company

• To increase greater awareness of the company

• To distribute the risk of bankruptcy across more investors

• The stocks help investors earn a higher rate of return

An investor bought 40 shares of ABC corporations's stock at $80 a share. Two weeks later, the investor receives notice that the corporation has approved a 2-for-1 stock split. Based on this information, the investor would own at the moment of the split

• 80 shares at $40 per share

• 40 shares at $40 per share

• 80 shares at $80 per

• 20 shares at $80 per share

Why would an investor buy a bond instead of a stock?

• It can yield a higher return on investment

• It is less risky investment

• To have ownership in a company

• To receive dividend payments

A type of security that signifies ownership in a corporation and represents a claim to part of the company's profits or losses

Part of a company's profits it pays to it's shareholders