Municipal Bonds Worksheet

Municipal bonds are

• issued by corporations to raise money for expansion.

• issued by local governments to raise money for construction projects.

• guaranteed to pay high dividends to the investor.

• taxes used to raise money for important city operations.

The Securities Investor Protection Corporation (SIPC) does NOT protect an investor when his investments go down in value because

• the investor should be licensed by the SEC.

• they only protect losses associated with high inflation.

• its role is to protect investors who have earned capital gains.

• it is part of the ups and downs associated with the risk of investing.

One service a stockbroker provides is:

• giving financial advice to investors.

• selling money orders and certifying checks for investors.

• guaranteeing investors a high return.

• selling commercial and large residential real estate to investors.

Public corporations are described as organizations that

• are not-for-profits.

• are always listed first on the New York Stock Exchange.

• have shares that are owned by investors.

• guarantee a positive return to investors.

Bonds are described as loans that

• are issued by adults over age 21.

• are issued by companies or a government.

• pay interest or dividends for a lifetime.

• earn dividends quarterly.

Which of the following best describes diversification?

• Avoiding any risk by investing in blue-chip stocks.

• Putting all investments in two financial products.

• Investing in different types of bonds.

• Reducing risk by investing in different types of securities.

A person bought stock for $4,000 and later sold it for 5,000. The sale resulted in a

• change in corporate stock yield.

• capital gain for the company.

• capital gain for the investor.

• net profit for the company.

Some people invest in collectibles such as paintings and coins as a strategy to accumulate wealth because

• there is no risk.

• they are tax free.

• their limited availability is likely to increase its value.

• they provide steady income.

An investor who wants an investment product that usually offers tax-free interest income should choose a

• common stock.

• mutual fund.

• municipal bond.

• savings account.

Investors select “blue chip” stocks because they

• are large public corporations.

• can avoid financial difficulties.

• have a reputation for being profitable.

• are listed on the American Stock Exchange.