Chapter 1 Flashcards
The return on common stocks comes from either two sources
Dividends and capital gains
Short-term investments generally rank high compared with other investment vehicles, But low relative to capital losses because of changing interest rates
False
For federal tax purposes, annual “operating income” derived from Real Estate investments would be considered
Capital gains
When does adventures of long-term capital gains is that despite preferential rates, “Paper Gaines”, Those unrealized, are taxed at that Federal level even though an investor still owns the stock
True
According to the text, a NOW Account is:
Simply a checking account that pays interest, No legal minimum balance
One attraction of series EE savings bonds is that investors need not report the interest earned on their Federal tax returns until the bonds are redeemed
False
Home ownership is the most popular investment vehicle
False
The lowest risk investment vehicle, most analysts would agree, it’s probably the ____
Us “ treasury EE bonds”
In the diagram for the investment process included in chapter 1, the broken lines are shown to illustrate
That financial institutions can participate in the financial markets
Three most popular investments:
Short term investment vehicles, residential real estate, and common stocks
Notes are _____, and bonds are ___
Short-term, long-term
An I-bond is a
Inflation adjusted bond, Doesn’t double in value
EE bonds advantages:
Principal protected, exempt from state and local taxes, Deferred for federal taxes, safest, Easy to purchase
Debt is
Simply a loan obligation to borrower to make periodic interest payments and to repay the full amount of the loan by some future date
Equity
Represent ongoing ownership in a business or property
Risk
The certainty surrounding the return that if particular investment will generate
Short-term investments
Savings instruments with lives of one year or less. Used to warehouse idol funds and providing liquidity
Common stock
Equity investments that represent ownership in incorporation
Fixed income securities
Investments that makes fixed cash payments at regular intervals
Mutual funds
Companies that pull money from many different investors and invest funds in a diversified portfolio of securities
Derivatives
Securities that are neither death nor equity but are structured to exhibit the characteristics of the underlying assets from which they derive their value
Dividends
Quarterly payments the corporation makes to its shareholders
Capital gains
Results from selling the stock or an assets, at a price that exceeds its original purchase price
EE bonds
Issued by the US treasury, savings bonds, earn a fixed rate of interest, compounded semiannually for 30 years. Risk-free
