Chapter 9 questions Financial Management

What is the difference between a traditional IRA and a Roth IRA

An IRA are tax deferred while Roth IRA are not tax deferred.

How can a 401K plan benefit you

A 401K can benefit you because it is a tax-deferred retirement plan that some employers offer their employees.

How is an IRA different from a 401K plan

A 401K is a tax-deferred retirement plan that some employers offer their employees. An IRA is a savings plan with special tax benefits.

What are the differences between a full- service broker and a discount broker

A full-service broker is a person who handles transfers of stocks and bonds between buyers and sellers. A discount broker charges smaller fees because they spend less time with customers than full-service brokers.

What is the difference between a load and a no-load fund

A load fund is a sales fee paid for investing in a mutual fund. A no-load funds do not charge a sales fee because they have no salespeople.

What is a mutual fund

A mutual fund in a business that accepts deposits from many people to invest in various ways.

What kinds of sites on the Internet provide financial information

All major mutual funds maintain a website. Also major companies such as Yahoo!finance and the Wall Street Journal have sites.

What other benefits can you receive from an investment besides a monetary return

Besides monetary return, you can earn a community or social return.

Why are blue chip stocks less risky than growth stocks

Blue chip stocks are businesses with histories of steady sales and profits.

How do Moody's and Standard and Poor's help investors choose which corporate bonds to buy

Both organizations evaluate corporations' financial situations and rate tem according to their ability to repay their debts.

Why do corporations sell bonds

Corporations sell bonds to raise money.

Why do corporations sell stock

Corporations sell stock to raise money for the business.

Why is your financial situation important to consider in making investment decisions

For example, if you have few financial responsibilities now, but your life-span goals require money. If you lose your savings on a risky investment, you may not recover quickly is you don't have a job. Your risks can affect you and your potential life.

Why does buying a corporate bond involve less risk than buying stock in the same corporation

If a corporation fails, you will receive your money before stockholders.

If you don't like taking risks, what kinds of investments should you make

If you don't like taking risks, you should make low-risk investments.

What is insider trading and why is it illegal

Insider trading is trading stocks based on information that is not available to the general public. This is illegal because it is not fair to other investors

What is the difference between saving and investing

Investing is to save in a way which earns an income. Just saving, only saves money.

What benefits do mutual funds offer investors

Mutual funds offer investors 1) to diversify your investments even if you have limited savings 2) the funds are managed to delay owner's' taxes.

What are several ways that you can tell an investment offer may be dishonest

One way you can tell that an investment offer may be dishonest is if a only your stockbroker knows about it. But common sense is the best way.

What are the differences between preferred and common stock

Preferred stock is a non voting share that pays fixed dividends. Common stock is a voting share that does not pay a set dividend.

What are the benefits of joining an investment club

Some benefits of joining an investment club are that you can share knowledge of investments and earn a return.

What are several investment objectives mutual funds follow

Some investment objectives mutual funds follow are global funds, index funds,social responsibility funds, and environmental funds.

What are the risks and responsibilities involved in real estate investing

Some risks and responsibilities in real estate are finding renters, paying loans, maintaining the properties, problematic renters, time, money,and decreasing value.

What does tax deferred mean

Tax deferred means tax free, so you can save a significant amount on income taxes during your working years.

What is a SEC and how does it benefit you

The SEC is the securities and exchange commission and it enforces the laws concerning the trading of stocks and bonds.

What is an investment's rate of return, and how is it measured

The income you earn on an investment is a return and the rate of return is measured as a percentage of the amount invested.

What is the relationship between risk and rate of return

The relationship between risk and reward is the higher the potential rate of return, the greater the risk.

What are the differences in how the stock exchange and NASDAQ work

The stock exchange is where orders to buy and sell stock are sent and carried out. The NASDAQ electronically links brokerage firms.

What are the two ways for you to earn a return from owning stock

Two ways for you to earn a return from owning stock are by dividends and by selling the stock.

How does diversification limit your overall risk

Why you diversify, you reduce your overall risk of loss.

How can you earn returns from investing in real estate

You can earn returns from investing real estate by buying a home or investing in other types of real estate.

How can you find out if complaints have been made about a stockbroker

You can find out if complaints have been made about a stockbroker with you state's office of attorney general.

What kinds of information can you get from The Wall Street Journal or from financial magazines

You can get quotes stock, bond and mutual fund prices.

If you are thinking about investing in less common ways, why should you be especially careful to investigate your choices

You should be careful about your choices to make sure you will earn the most you can and to earn the money legally.

Why should you look at a fund's performance over more than one year

You should look at a fund's performance over more than one year to determine if a stock will be a solid or risky investment.

Why should you invest only part of your money in highly risky stocks

You should only invest part of your money in highly risky stocks because if you lose money on a highly risky stock, you will not lose all your money.

How can your own investment objectives help you to select a mutual fund

Your investment objectives can help you select a mutual fund because you can choose z fund you have interest in.