CHAPTER 11 BOOKWORK QUESTIONS Name: ______
(20 Points)
Section 11.1
1. Name three ways that people can save money AND what are these claims called?
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2. How do banks, savings and loans associations, and credit unions function as financial intermediaries? ______
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3. Why should investors diversify their investments? ______
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4. In terms of return AND liquidity what is an advantage AND a disadvantage of a savings account? ______
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5. In terms of return AND liquidity what is an advantage AND a disadvantage of a CD?
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Section 11.2
6. What type of risk do bonds have, generally, AND based on your knowledge of risk and return, how do bonds compare with other investments in terms of return? ______
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7. Why would someone buy a bond paying 5% interest if the current rate is 6% AND what do we call this practice? ______
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8. What is the relationship between bond ratings, risk and interest rates? ______
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9. What are two reasons municipal bonds are attractive to investors? ______
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10. What do corporations NOT have that governments do AND, therefore, what do investors in corporate bonds have to depend on? ______
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Section 11.3
*questions 11-20 will be written out on a separate (yours) piece of paper.
11. Name AND describe the two ways stockholders can make a profit.
12. What is the difference between income and growth stocks (be sure to describe what growth stock companies do with their earnings)?
13. What is the advantage of being a common stock owner? What is an advantage of being a preferred stock owner?
14. Why are stocks riskier than bonds (answer in terms of what happens if a company goes bankrupt)?
15. Who do stockbrokers work for AND how do stockbrokers earn money?
16. What types of stock and bond transactions does the NYSE handle AND what are these companies referred to?
17. How are stocks traded on an OTC market AND what is the best known of these markets in America?
18. Describe Bull AND Bear markets, including how investors behave in each.
19. What do the stocks on the DOW represent AND why does the S & P 500 give a broader picture of stock performance?
20. What does the S & P 500 give (in relation to the Dow) AND why?
1. Give a general definition of investment AND give an example of how investment promotes economic growth. ______
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4. What is a pension fund AND what do pension fund managers do? ______
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