Personal Finance: Investment Strategies, Bonds, Stocks, and Risk Management

Why is it important to comparison shop for insurance policies?

Because of the large variations in premiums and services.

What is true regarding bonds?

Bonds are liabilities of the issuer.

What are you investing in when you buy shares of a collection of diversified securities?

Mutual funds.

What characterizes a bull market?

Investor optimism.

What is the process to settle disputes between a brokerage firm and its clients?

Arbitration.

What is a collection of securities assembled to meet common investment goals called?

Portfolio.

What is the first thing to determine to reach an investment goal after accumulating capital?

The rate of return.

What represents ownership in a corporation?

Stocks.

Which type of investment has no maturity date?

Common stocks.

What is one of the most frequent investment objectives of an individual?

Enhancing current income.

What does business risk relate to for an investor?

The firm's ability to meet operating expenses in a timely manner.

What type of risk results from investor behavior affecting security prices?

Market risk.

What is an investment that earns interest on interest called?

Fully compounded rate of return.

What is true about risk and expected return?

The higher the risk, the higher the expected return.

How is corporate ownership evidenced?

By common stocks.

What are the main advantages of common stock investments to stockholders?

Attractive returns and active trading.

How is stock profitability often measured?

Return on equity.

What are highly speculative investments seeking large profits from capital gains called?

Aggressive growth funds.

What type of funds automatically change asset allocation as an investor ages?

Target-date funds.

What does leverage mean in investing?

Using borrowed money to magnify returns.

Who actually owns a mutual fund?

The shareholders.