Financial Stewardship Ch.11

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their investment plan. This percentage can be calculated by subtracting your age from

100

an employer-sponsored retirement account, and participating in one is one of the easiest ways to begin an invest program

401(k) account

Inflation risk deals with

A reduction in purchasing power

The process of spreading your assets among several different types of investments to lessen risk is called

Asset allocation

Business failure risk can be due to

Bad management/or unsuccessful products

Which of the following is not a true statement?

Because investment objectives deal with the future, it is useless to make long-term goals

Business failure risk

Causes the business to be less profitable than originally anticipated

Timothy Calibe purchased common stock in XYZWidgets.com. To be a successful investor, he should

Continue to evaluate his investment in XYZWidgets.com after the purchase

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n)

Convertible bond

A bond that is backed only by the reputation of the issuing corporation is called a(n)

Debenture bond

A fancy way of saying you need to diversify your investments is

Don't pull all of your eggs in one basket

Market risk is associated with fluctuations in the market due to

Economic conditions such as rapid expansion and recession

A bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a

General obligation bond

Which of the following reduces your purchasing power?

Inflation risk

When choosing an investment, you should consider risk. The four primary risk components are

Inflation, interest rate, business failure, and market

Which of the following investments is the most liquid?

Interest-bearing checking account

A discounted security means that the actual purchase price is

Less than the maturity value

Which of the following risks deals with fluctuations in the economy from a period of rapid expansion followed by a period of recession?

Market risk

A corporate bond that is secured by various assets of the issuing firm is called a(n)

Mortgage bond

A debt security issued by a state or local government is known as a

Municipal bond

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

Revenue bond

Which of the following steps is NOT a factor to be considered before making your first investment?

Save at least $10,000 to invest

Bonds of a single issue that mature on different dates are called

Serial bonds

A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is called a(n)

Sinking bond

Generally, interest on corporate bonds is normally paid every

Six months

Which of the following has returned an average of almost 10% per year since 1926?

Stocks

Which of the following investments typically has the largest potential growth?

Stocks

Which of the following investments typically has the most risk?

Stocks

A security issued by the U.S. government where the principal increases with inflation and decreases with deflation is called a

TIPS

A U.S. government security issued in minimum units of $100 with 4, 13, 26, or 52-week maturities is called a

Treasury bill

A U.S. government security issued in minimum units of $100 with a 30-year maturity is called a

Treasury bond

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10

Treasury note

Which of the following is not a U.S Treasury security?

Treasury stock