AnswersPersonal Finance - EL3403Investing and Financial Markets

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10 verified answers
1
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Which best describes what a market index does?

A
An index measures market performance.
B
An index measures economic trends.
C
An index measures growth.
D
An index measures the performance of a single stock.
2
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best

b
by earning interest
b
by selling the asset for a profit
b
by raising capital
b
by growing the asset
3

most

p
paying taxes
h
hiring workers
r
repaying investors
p
producing goods
d
distributing goods
b
buying materials
4

Which is true about investments and risk?

A
Low-risk investments have a high return over the long run.
B
High-risk investments usually fail.
C
Safe investments are always somewhat profitable.
D
Every investment carries some degree of risk.
5

Which statement best describes how an investor makes money off debt?

A
An investor makes money by issuing bonds.
A
An investor makes money by earning interest.
A
An investor makes money by raising capital.
A
An investor makes money by being repaid for the principal.
6

If a company pays dividends on a stock, does that mean that the stock has appreciated in value? Why or why not?

Y
Yes, the payment of dividends indicates that a stock’s value has increased.
N
No, the payment of dividends indicates that a company has earned profits.
Y
Yes, the payment of dividends indicates that a company’s assets have grown.
N
No, the payment of dividends indicates that a company can repay investors.
7

Capital appreciation refers to

t
the increased value of an asset.
t
the ability to make a profit from owning stock.
t
the distribution of earnings to shareholders.
t
the profitable sale of shares.
8

Which are common types of bonds that are currently issued? Check all that apply.

A
corporate bonds
B
equity bonds
C
municipal bonds
D
Treasury bills
E
Treasury notes
F
war bonds
9

best

T
They both use taxes to support a country’s growth.
T
They both invest money to earn a profit.
T
They both receive capital to use for growth.
T
They both act as angel investors for start-ups.
10

How do bonds generate income for investors?

A
Bonds depreciate in value.
B
Bonds protect investors from bankruptcy.
C
Bonds pay interest to the bank that sold the bond.
D
Bonds pay a specified amount to the investor at maturity.
11

Are the buying and selling of stocks centralized activities? Why or why not?

A
Yes, the New York Stock Exchange is the primary exchange for all the world’s most important trades.
B
No, people can buy stocks anywhere, and they do not need to go through a market.
C
Yes, the world’s stock markets are coordinated exchanges, and they are dependent on one another.
D
No, there are many stock markets around the world, and they are independent of one another.
12

Once stocks are on the market, which best explains how their prices are set?

A
Prices are controlled by the issuing company.
B
Prices are set by the financial market.
C
Prices follow economic trends.
D
Prices fluctuate on the basis of demand.

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