Finance CH 11 Study Notes

Which three of the following are "safe" investments

- Government bonds - Select mutual funds - Certificate of deposit

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

Debenture bond

An _______ fund is an amount of money you can obtain quickly in case of an immediate need

Emergency fund

Which three of the following are useful questions for establishing investment goals

- How much risk are you willing to assume - What conditions could alter your investment goals - How much money do you need

Inflation is the rise in the general level of

Prices of goods and services

The three advantages that corporations have by issuing convertible bonds are

- Interest rates are lower - Convertible feature attracts investors who are interested in speculative gain - If the bond is converted, it no longer has to be redeemed at maturity

Three ways that the internet can help you invest in bonds are

- Research information online - Price information - Lower commisions with online trades

A short-term loan that is approved before the money is actually needed is

A line of credit

A call feature allows the corporation to buy outstanding bonds from current bondholders ________ the maturity date

Before

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

Convertible bond

The higher the risk, the

Higher potential return

A corporate bond is a corporation's written pledge to repay a specified amount of money along with

Interest

What type of risk associated with preferred stocks, government, or corporate bonds is the result of changes in the interest rates of the economy

Interest rate risk

Fluctuation of prices of securities due to the behaviors of the investors in the marketplace is known as

Market risk

Face value is the dollar amount the bondholder will receive at the bond's _______ date

Maturity date

For a corporate bond, the date on which the corporation is to repay the borrowed money is called

Maturity date

"I want to make $300 quarterly for the next three years." This goal is not only specific but because it mentions a number, it is also

Measurable

A debt security issued by a state or local government is called a

Municipal bond

A growth company has

No dividend

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

Sinking fund

A general obligation bond is a bond backed by the full faith, credit, and unlimited ______ power of the government that issued it

Taxing

As interest rates decrease, bond prices increase

True