FUNDAMENTALS OF INVESTING FINAL PAPER FULL QUESTIONS AND CORRECT ANSWERS PREMIUM STUDY SHEET

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