FUNDAMENTALS OF INVESTING FINAL
PAPER FULL QUESTIONS AND CORRECT
ANSWERS PREMIUM STUDY SHEET
●● Bonds
Answer: investor lends funds in exchange for interest income and
repayment of loan in future
●● Equity
Answer: ongoing ownership in a business or property
●● Derivative securities
Answer: derive value from an underlying asset, options and futures
●● Suppliers of funds
Answer: individuals
●● Demanders of funds
Answer: government and businesses
●● Short-term investments
, Answer: conservative, 1 year or less, highly liquid investments (money
market funds, t bills, CDs, commercial paper)
●● Advantages of short-term investments
Answer: high liquidity, low risk of default
●● Disadvantages of short-term investments
Answer: low levels of return, loss of purchasing power from inflation
●● Common stock
Answer: represents an ownership in a share of a corporation, returns
come through dividends and capital gains
●● Fixed income securities
Answer: bonds, convertible securities, preferred stock
●● Mutual funds
Answer: a portfolio of stocks bonds and other securities created by
pooling the funds of different investors, allow investors to be diverse
without investing a lot of money
●● ETFs
PAPER FULL QUESTIONS AND CORRECT
ANSWERS PREMIUM STUDY SHEET
●● Bonds
Answer: investor lends funds in exchange for interest income and
repayment of loan in future
●● Equity
Answer: ongoing ownership in a business or property
●● Derivative securities
Answer: derive value from an underlying asset, options and futures
●● Suppliers of funds
Answer: individuals
●● Demanders of funds
Answer: government and businesses
●● Short-term investments
, Answer: conservative, 1 year or less, highly liquid investments (money
market funds, t bills, CDs, commercial paper)
●● Advantages of short-term investments
Answer: high liquidity, low risk of default
●● Disadvantages of short-term investments
Answer: low levels of return, loss of purchasing power from inflation
●● Common stock
Answer: represents an ownership in a share of a corporation, returns
come through dividends and capital gains
●● Fixed income securities
Answer: bonds, convertible securities, preferred stock
●● Mutual funds
Answer: a portfolio of stocks bonds and other securities created by
pooling the funds of different investors, allow investors to be diverse
without investing a lot of money
●● ETFs