Investing Review 3

A type of investment that invests in a lot of different companies is called

• Stocks

• Bonds

• Mutual funds

• T-bills

What is a stock?

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

• A share of ownership in a company

• A collection of investments sold as a package.

• An option to purchase something in the future at todays price.

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

• The stocks help investors earn a higher rate of return

• To raise money to grow the company

• To distribute the risk of bankruptcy across more investors

• To increase greater awareness of the company

This is where your orders to buy or sell stock are sent and carried out

• Stock Exchange

• Brokerage Firm

• Stock Meeting Place

• Money Exchange

Dow-Jones Industrial Average is made up of how many stocks

• 25

• 30

• 50

• 100

The number of years it takes for your money to double

• 72 Rules

• Rule of 72

Why is compound interest more beneficial than simple interest?

• Your money grows faster when it is compounded

• Your taxed on simple interest, but not compound interest

• Fees for compound interest are greater than simple interest

• Compound interest is hard to calculate, so fewer use it

The relationship between risk and return can be stated as

• Higher risk indicates higher return

• Higher risk indicates lower return

• Lower risk indicates higher return

• No relationship exists between risk and return

How can you make money on stocks?

• Buy them when the price is high and sell when the price is low

• Interest

• Dividends

• Holding the stock at least 3 years

If interest rates rise, what will typically happen to bond prices?

• Rise

• Fall

• Stay the same

• Interest Rates are not related to bond prices