FS-Final Review

Capital gain means

• The price of a financial asset increased between the time it was purchased and the time it was sold.

• There has been a gain in economic capital, such as the number of machines, tools, and buildings.

• The number of financial assets has increased over time.

• The average price of financial assets has increased over time.

What is a stock?

• A stock is a share of ownership in a publicly traded company.

• A stock is a certificate of indebtedness issued by a corporation.

• A stock is a type of currency issued by the federal government.

• A stock is a loan you must pay back to a creditor.

How can a company raise money to grow?

• It can issue an IPO.

• It can trade its stock on the New York Stock Exchange.

• It can purchase its stock from its stockholders.

• It can pay off its debts.

Each of the following is a benefit of issuing stock to grow a business except

• Access to more funds than she could get from her own savings.

• Access to money that she does not have to repay, unlike a loan.

• The possibility of rapid growth.

• Giving up shares of ownership.

Which of the following financial investments would be considered most risky?

• Cash

• Certificates of Deposit

• Corporate bonds

• Stocks

Which of the following financial investments would be considered most risky?

• savings accounts

• mutual funds

• stocks

• commodities

What is meant by the statement, "the higher the risk, the higher the potential reward?

• If you buy a very risky financial investment, you will receive a very high reward.

• Only very risky financial investments pay off.

• If you buy a financial investment that has low risk, you can't possibility gain a high reward.

• The potential for reward is greater with a riskier financial investment because prices are volatile, meaning they can decrease greatly or they can increase greatly.

Diversification offers all of the following benefits, except

• Reduces your risk

• Increases your opportunity for return

• Spreads your risk over many financial investments

• Guarantees a positive return on your financial investments.

Throughout history, people have used many things as money, including beads, cows, dried fish, and copper, to buy goods and services.

• True

• False

A bond is a

• Contract that gives the investor the right to trade a specific asset before a certain date

• Loan made by investors to a company or government

• Share in the ownership of a company

• Loan made to customers