Chapters 15 & 17. Bonds & Alternatives

Yield to maturity is a calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current market _____and the dollar amount of income _____.

- Price/value - Interest

The following factors cause gold prices to fall?

- rising interest rates - deflation - easing of international tensions

A price quote of 79 means:

79% of face value

Real Estate Investment Trust (REIT)

A firm that pools investor funds and invests them in real estate

Bonds that are judged to be of the best quality would have which rating?

AAA or Aaa

For Standard & Poor's, the bond ratings generally range from Blank______.

AAA to D

Which of the following best describe the contrast between the liability of a limited partner versus a general partner?

As a limited partner, you cannot lose more than your initial investment. As a general partner, you bear all financial risks.

True or false: In times of deflation and recession when the stock market is declining, real estate prices are usually rising.

False

Which of the following is true about diversification and real estate?

It is difficult for the individual investor to diversify real estate investments.

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

Municipal bond

drawbacks to investing in precious metals?

Their eventual profit upon sale is subject to market forces. Precious metals do not bear current income.

Which of the following are reasons why corporations sell bonds?

They use interest as a tax break. They find it difficult to sell stock. They need money to finance ongoing activities.

True or false: Financial leverage allows you to buy more expensive real estate than you otherwise could afford and to realize a higher return on your investment.

True

True or false: The advantage for an investor to trade bonds through an online broker is discounted commissions on trades

True

Financial leverage

Using borrowed funds to purchase real estate

A yield calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current price, and the dollar amount of interest is called Blank______.

Yield to maturity

A call feature:

allows the corporation to call in, or buy, outstanding bonds from current bondholders before the maturity date

A corporate bond is a corporations written pledge to:

be repay a specified amount of money along with interest

Unlike stocks and mutual funds, which investment type is known for safety?

bonds

A typical bond transaction would include:

cheaper commissions if you buy or sell a number of bonds. sales executed by full-service, discount, or online brokerage firms. a normal minimum commission between $5 and $25.

A debenture is a:

corporate bond that is backed only by the reputation of the issuing company.

There may be differences in how interest is paid when comparing Treasury securities and Blank______.

federal agency debt instruments

The U.S. treasury is an example of a:

federal agency publications with information on bonds.

Interest paid on U.S. government securities is taxable for:

for federal income tax purposes, but is exempt from state and local taxation

factors that appeal to investors when investing in precious stones?

inflation hedge great durability

A limited partner in a real estate venture is not liable for losses beyond their Blank______.

initial investment

A bond ladder:

is a strategy where investors divide their investment dollars among bonds that mature at a regular interval in order to balance risk and return To start your bond ladder, you purchase different bonds with maturities spread out over a number of years

A registered bond:

is registered in the owner's name by issuing the company. Generally, interest checks for registered bonds are mailed directly to the bondholder of record

Commercial property includes

land and buildings that produce lease or rental income

What metals besides gold serve as a hedge against inflation?

platinum palladium rhodium silver

factors cause gold prices to rise?

political instability inflation fear of war

Examples of direct real estate investments?

raw land vacation home home (residence)

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

research information online. price information. lower commission with online trades.

Which type of investment often returns more than other investment alternatives like bonds, yet it is also more risky?

stocks

Yield is the:

the rate of return earned by an investor who holds a bond for a stated period of time Changes in yield for a bond are caused by an increase or decrease in the price of a bond

Municipal bonds are used to finance which of the following?

toll roads airports schools

Collectibles include?

works of art rare coins stamps antiques