Stock vs Bond

What is a stock?

• A measurement of a company’s profits

• An investment option that allows you to own a small piece of a company

• An annual report that includes details about a company’s leadership and earnings

• A low-risk savings option that can help you build an emergency fund

When reading a stock quote, which of the following metrics would give you the best idea of the total value of the company?

• The stock ticker symbol

• The price change of the stock, quoted as a percentage

• The market cap

• The stock’s opening and closing price for that day

Which of the following is TRUE about a stock split?

• Stock splits impact the overall value of a company

• Stock splits decrease the number of shares you own

• Stock splits indicate that a company is doing poorly

• Stock splits make a stock more accessible to a greater number of investors

Which of the following most accurately describes what a bond is?

• A bond is a government loan made to an individual investor with the expectation that it will be paid back with interest

• A bond is an investment in which a corporation lends an individual investor money with the expectation that it will be paid back with interest

• A bond is a government loan made to a corporation with the expectation that it will be paid back with interest

• A bond is an investment in which an investor lends money to a corporation or government with the expectation that it will be paid back with interest

Juan buys a bond with a fixed coupon rate of 3%. Six months later, similar bonds that are issued have a coupon rate of 4%. Which of the following is TRUE if he chooses to sell the bond before maturity?

• The price of Juan’s bond will increase

• More investors will be willing to buy Juan’s bond

• The interest rate of Juan’s bond will increase to reflect the current market

• The price of Juan’s bond will decrease

One difference between bonds and bond funds is...

• Buying an individual bond is generally cheaper than buying a bond fund

• A bond fund can help you diversify your investment portfolio

• Bonds pay dividends to its investors

• You receive the principal amount you invest in a bond fund after a certain amount of time

Which of the following accurately describes a difference between an individual bond compared to a bond fund?

• A bond pays you dividends while a bond fund pays you regular interest

• A bond guarantees you a higher rate of return than a bond fund

• A bond is issued by a company while bond funds only invest in government bonds

• A bond is considered to be a less diversified investment than a bond fund

You bought 10 shares of stock in StreamingVideoCo for $45 per share. Two months later you sold the 10 shares of stock for $80 per share. What was your profit or loss on StreamingVideoCo stock? (Assume that StreamingVideoCo didn't pay a dividend and that you didn't incur any trading fees during that period.)

• Loss of $800

• Profit of $350

• Loss of $450

• Profit of $800

How is a bond different from a stock?

• A bond is a loan you give to an organization while a stock is partial ownership in a company

• Bonds are typically riskier than stocks but have the potential to earn higher returns

• Bonds are usually issued by smaller startup companies while stocks are issued by well-established organizations

• Bonds are best for earning high returns while stocks are best for providing a stable source of income

How can someone make money from investing in a stock?

• They sell the stock for a lower price than what they bought it for

• They receive dividends or they sell the stock at a higher price than what they bought it for

• The stock loses value but the overall market experiences a positive return

• They sell the stock for the same price they bought it for