Economics Chapter 11 Study Guide

To finance the building of a new police station, a local government is most likely to issue a:Junk bondTreasury bondMunicipal bondMoney Market bond municipal bond
All of the following are low-risk investments EXCEPT:Junk bondsTreasury bondsMunicipal bondsSavings bonds junk bonds
The interest rate the bond issuer pays to the bondholder is called the:Coupon rateMaturity rateDiscount rateValue rate coupon rate
The main advantage of diversification as an investment policy is that it:Reduces risk to investorsIncreases investors’ access to their moneyOffsets the effects of inflation on investmentsGuarantees a fixed rate of return on an investment reduces risk to investors
You do not have to pay state taxes on interest earned on:corporate bondsTreasury billsMoney Market Mutual fundsJunk bonds money market mutual funds
When you invest in a mutual fund __________________________________Your money is invested in a variety of insurance policiesYou have easier access to your money than in a savings accountYour money is invested in a variety of stocks and bondsYou are guaranteed a fixed return on your investment your money is invested in a variety of stocks and bonds
An example of equity is:A treasury bondA share of stockA treasury billA long-term certificate of deposite a share of stock
Investing in a money market mutual fund is a higher risk that investing in a certificate of deposit because unlike CDs, money market funds _____________________________________________Are not insured by the FDICAre not protected by the Securities and Exchange CommissionDo not earn a fixed interest rateMust be held for a preset amount of time are not insured by the FDIC
Savings bonds differ from most other bonds in that:They provide a higher rate of returnThey are held for a shorter timeThe buyer does not receive periodic interest payments in exchange for a lower purchase priceThey are issued in fairly large denominations in exchange for a lower purchase price the buyer does not receive periodic interest payments in exchange for a lower purchase price
All of the following are basic components of bonds EXCEPT:MaturityLiquidityPar ValueCoupon rate liquidity
An accurate statement about bonds would be that ________________________________They are insured by the FDICThey are generally held for 3 or 6 monthsThey are usually a low-risk investmentThey entitle the holder to a share of ownership in a corporation they are usually a low-risk investment
The Dow Jones Industrial Average consists of ________________________________________500 different stocks that change annuallyThe top-selling 250 stocks over a 10-year preiod30 stocks that are considered representative of the market as a whole60 stocks selected from the NYSE, the NASDAQ-AMEX, and the OTC markets 500 different stocks that change annually
A stock that reinvests its earnings in the business instead of paying regular dividends is called:An income stockCommon stockPreferred stockA growth stock a growth stock
An example of blue chip stock might be __________________________________A new start-up firmA foreign-owned company that operates in another countryAn established company that is traded over the InternetA large, well-known company traded on the NYSE a large, well-known company traded on the NYSE
A stock split is most likely to occur when __________________________________________A company is losing moneyStockholders demand higher dividendsThe price of a stock becomes too highThe stock market as a whole is doing poorly the price of a stock becomes too high
All of the following are examples of financial intermediaries EXCEPT:A credit unionA stock certificateA finance companyA life insurance company a finance company
The most trades are made __________________________________________On the New York Stock ExchangeAt the Chicago Board of TradeOn the NASDAQ-AMEXOn the OTC market on the OTC market

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