WorksheetsCh 7 Bonds & Other Lending
Total questions: 20
Worksheet time: 10mins
What is a bond?
A type of stock
A debt security used to raise money
A form of currency
A government tax
What is a characteristic of municipal bonds?
Fully taxable
State and local government bonds that are tax-free to residents
High-risk securities
Convertible to stocks
Which bonds are good for lower tax bracket investors?
Corporate Bonds
Junk Bonds
International Bonds
Zero Coupon Bonds
What is a characteristic of international bonds?
Vital for a diversified portfolio
Issued by local governments
Outside the country and not vital for a diversified portfolio
High yield and tax-free
What is a characteristic of zero coupon bonds?
Regular interest payments
Highly sensitive to interest rates
Convertible to stocks
Tax-free
Which bonds are problematic due to subprime mortgage loans?
Convertible Bonds
Junk Bonds
Mortgage Bonds
International Bonds
What do you get with ownership investments?
Fixed interest rate
Partial ownership in a company
Guaranteed returns
Tax-free income
When is it advisable to use ownership investments?
When you expect to sell within 5 years
When you don’t need to make your money grow after inflation or taxes
When you are investing long term like 7+ years
When you need your current income
What is another advantage of CDs?
Pays a set interest rate
High liquidity
No penalties for early withdrawal
Unlimited term options
How long can you typically choose to invest in a CD?
3, 4 or 5 years
6, 12, or 24 months
2, 4, or 6 years
10, 20, or 30 years
What is a characteristic of ownership investments?
Fixed returns
Partial ownership in assets
Guaranteed income
Short-term focus
What is a penalty for early withdrawal from CDs?
No penalty
all of the interest you have earned to date
1 year interest
3 months interest
Which is not a bond rating
AAA and AA high grade
A- and BBB general quality
CCC average Investor grade
BB or Lower Junk Bonds
What happens to bond rates when interest rates raise?
They rise
They fall
They remain the same
They fluctuate randomly
Do longer maturity bonds have higher or lower rates than shorter term bonds?
Higher rates
Lower rates
The same rates
It depends on the bond issuer
Which is not a lending investment
Corporate Stocks
Savings Accounts
Checking Accounts
Cd's
Are bonds FDIC Insured
Yes
No
Can some Cd's be FDIC insured
Yes
No
Money market accounts completely replace a checking or savings account?
True
Falso
Which is not true about Bonds
They pay higher interest than checking accounts
It's the best place to put your emergency fund
When interest rates raise bond prices fall
Longer maturity bonds have higher rates generally
