chap 11

Question 1

savings

Answer 1

is income not used for consumption

Question 2

investment

Answer 2

is the use of income today that allows for a future benefit.

Question 3

financial system

Answer 3

is all the institutions that help transfer funds between savers and investors.

Question 4

financial asset

Answer 4

is all the institutions that help transfer funds between savers and investors.

Question 5

financial intermideary

Answer 5

is an institution that collects funds from savers and invests the funds in financial assets

Question 6

financial market

Answer 6

where buyers and sellers exchange financial assets.

Question 7

mutual fund

Answer 7

is an investment company that gathers money from individual investors and purchases a range of financial assets.

Question 8

capital fund

Answer 8

is where long-term financial assets are bought and sold.

Question 9

money market

Answer 9

is where short-term financial assets are bought and sold

Question 10

primary market

Answer 10

is for buying financial assets directly from the issuer.

Question 11

secondary market

Answer 11

is where financial assets are resold.

Question 12

investment objective

Answer 12

is a financial goal used to determine if an investment is appropriate.

Question 13

risk

Answer 13

is the possibility for loss on an investment.

Question 14

return

Answer 14

is profit or loss made on an investment.

Question 15

diversification

Answer 15

is the practice of distributing investments among different financial asse

Question 16

stock exchange

Answer 16

is a market where securities are bought and sold.

Question 17

capital gains

Answer 17

profit made from the sale of securities

Question 18

common stock

Answer 18

gives shareholders voting rights and a share of profits.

Question 19

preferred stock

Answer 19

gives shareholders a share of profits but, in general, no voting rights.

Question 20

stockbroker

Answer 20

buys and sells securities for customers.

Question 21

future

Answer 21

is a contract to buy or sell a stock on a specific future date at a preset price.

Question 22

option

Answer 22

gives an investor the right to buy or sell stock at a future date at a preset price.

Question 23

stock index

Answer 23

measures and reports the change in prices of a set of stocks.

Question 24

bull market

Answer 24

measures and reports the change in prices of a set of stocks.

Question 25

bear market

Answer 25

occurs when stock market prices decline steadily over time.

Question 26

par value

Answer 26

is the amount a bond issuer must pay the buyer at maturity.

Question 27

maturity

Answer 27

is the date when a bond is due to be repaid.

Question 28

coupon rate

Answer 28

is the interest rate a bond-holder receives every year until maturity

Question 29

yield

Answer 29

is the annual rate of return on a bond.

Question 30

junk bonds

Answer 30

is the annual rate of return on a bond.