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Lesson 11-2 Guided Reading Activity
Review QuestionsDirections:Read each main idea and answer the questions below. Refer to your textbook as you write the answers.
A. Bonds as Financial Assets
Main Idea: Governments and business issue bonds when they need to borrow funds for long periods. Bonds have three main components: par value, maturity, and coupon rate. Bonds have ratings that help consider the quality of the bond.
1.What is a bond and what are its three main components?
2.What determines the price of a bond?
3.How do investors usually compare bonds, and what determines it?
4.What are bond ratings, and how are they calculated?
5.How does a bond’s rating affect its price?
6.How: How do you determine a bond's current yield? ______
Review Questions
Directions: Read each main idea and answer the questions below. Refer to your textbook as you write the answers.
B. Financial Assets and Their Characteristics
Main Idea: The modern investor has a wide range of financial assets from which to choose. These include certificates of deposit, bonds, and Treasury notes and bills. They vary in cost, maturity, and risk.
7.Why are certificates of deposit attractive to small investors?
8.What are junk bonds?
9.What are municipal bonds used to pay for?
10.A beneficiary is person designated to take ownership of an asset if the owner of the asset dies.
11.What is the difference between Treasury notes, Treasure bonds, and Treasury bills?
12.When do you pay taxes on money invested in an IRA?
Review Questions
Directions: Read each main idea and answer the questions below. Refer to your textbook as you write the answers.
C. Markets for Financial Assets
Main Idea:Investors often refer to markets according to the characteristics of the financial assets traded in them. These markets overlap to a considerable degree.
13.What is the difference between a capital market and a money market?
14.What is the difference between a primary and a secondary market?
15.When: When will you want to begin saving and investing your money? ______
16.Where: Where can only the original issuer sell or repurchase a financial asset? ______
17.Why: Why do many investors purchase money market mutual funds? ______
18.How: How does a financial asset become part of the secondary market? ______
Summary and Reflection
Directions: Summarize the main ideas of this lesson by answering the questions below.
19.You have just inherited $10,000 from an aunt. Consider what you might want to use the money for in the future, and then detail what sort of investment strategy would be the best way to get to your goal. Is your goal a long term one, or is it more immediate? How much risk are you willing to take on to meet that goal? Where will you invest your money?
17.Because they pay slightly higher interest rates than banks
18.If it can be sold to someone other than the original issuer
19.Students' answers will vary, but they should be sure to detail what sort of time frame their goal involves, and what financial assets would be best suited to their goals. Students may say that they are saving/investing the money for college or to purchase a house in the future, in which case they should make sure that the maturity of the financial asset they chose should match when they anticipate needing the money.
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