19.3 bonds and mutual funds Flashcards Preview

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Flashcards in 19.3 bonds and mutual funds Deck (38):
1

What affects the value of a bond?

  • changing interet rates and the credit rating of the borrowing organization
  • if the bond's stated interest rate is lower than interest rates on similar bonds then investors will want to buy the bond for less than its face value
  • if the bond's stated interest rate is higher than interest rates on similar bonds than the seller of the bond will want to receive more than its face value

2

Why do governments and corporation sell bonds?

to raise money for current operations or future expansions

3

value of each share in a mutual fund

net asset value (NAV)

4

the price of a mutual fund share is most affected by

  • current tax rates
  • the value of investments
  • current foreign rates
  • the value of housing

the value of investments

5

bonds represent ____

debt

6

What is a safe investment for people with small amounts of money to invest?

US savings bonds

7

bonds represent ____ of a company and stocks represent ____ in a company

bonds represent debt of a company and stocks represent ownership in a company

8

bonds issued by local and state governments

municipal bonds

aka munis

9

true or false

a bondholder is part owner of a company

false

a stockholder is part owner of a company

10

What is the different between investing in bonds and investing in stocks?

  • when you invest in stock you become an owner in the company
  • when you buy a bond you are lending money to the company

11

gotham city wants to pave a new street, batman boulevard.  how can it fund the project?

  • sell stock
  • encourage local citizens to purchase municpal bonds
  • purchase a bond fund
  • do a hostile takeover of another city

encourage local citizens to purchase municipal bonds

12

describe mutual funds

  • is managed by a professional who uses the investors' money to buy and sell a wide variety of stocks or bonds
  • the value and income of the investments made determine the value of the mutual fund shares

13

place where bonds are bought and sold

Bond Market

14

Each bond has a ____ value, also called the maturity value

each bond has a face value, also called the maturity value

15

interest is paid to a bondholder based on the bond's

  • maturity (face) value and stated interest rate
  • stated interest rate and market value
  • maturity date and maturity (face) value

maturity (face) value and stated interest rate

16

What are the 6 main types of mutual funds?

  1. Aggressive growth stock funds - seek quick growth, but also have higher risk
  2. Income funds - specialize in stocks that pay regular dividends
  3. International funds - invest in stock of companies from around the world
  4. Sector funds - buy stocks of companies in the same industry such as health care, energy or telecommunications
  5. Bond funds - specialize in corporate bonds
  6. Balanced funds - invest in both stock and bonds

17

Which of the following is NOT true about a mutual fund?

  • it is less risky than purchasing individual stocks
  • it is managed by a professional fund manager
  • a fee is charged to manage the fund
  • it will not help you diversify your portfoloio

it will not help you diversify your portfolio

18

an investment fund set up and managed by a company that receives money from many investors

mutual fund

19

more than 60,000 different ____ funds are available to investors around the world

more than 60,000 different mutual funds are available to investors around the world

20

What are some different objectives of mutual funds?

  • some emphasize growth stocks
  • some emphasize stocks that pay high dividends
  • some emphasize international stocks

21

Describe Series EE savings bonds.

  • can buy from $50-$10,000 range
  • is bought at half its face value (so you pay $25 for a $50 bond)
  • length of time bond is held determines the amount of interest
  • interest is exempt from state and local taxes

22

Describe a corporate bond.

  • each bond has a face value
  • interest is paid to the investor periodically (usually 2 times per year)
  • the interest paid is based on the face value and the stated interest rate
  • on the bond's maturity date, the face value is repaid to the investor

23

true or false

interest rates in an economy affect the value of a bond

true

24

Describe the I Savings bond.

  • pay an interest rate that changes with inflation
  • purchased at face value (you pay $50 for a $50 bond)

25

A ____ buys stocks of companies in the same industry such as healthcare, food or finance

 

  • aggressive-growth stocks fund
  • sector fund
  • bond fund
  • income fund

sector fund

26

a series EE savings bond purchased for $50 would have a face value of:

 

  • $50
  • $100
  • $150
  • $200

$100

27

bonds issued by corporations

corporate bonds

28

What do you become when you buy a bond?

creditor

29

municpal bonds are issued by

  • corporations
  • federal govt
  • international companies
  • state and local govts

state and local governments

30

a certificate representing a promise to pay a definite amount of money at a stated interest rate on a specified due date

bond

31

When you buy a ____, you are lending money to the organization selling the ____.

when you buy a bond, you are lending money to the organization selling the bond

32

What is an advantage of municipal bonds?

the interest earned on these bonds is usually tax exempt from federal and state income taxes

33

Most municipal bonds are considered ____ investments than corporate bonds

most municipal bonds are considered safer investments than corporate bonds

34

What is the difference between treasure bills (t-bills) and treasure notes (t-notes)?

t-bills are for short term (91 days to 1 year)

t-notes are longer term (1-10 years)

35

the due date of a bond

maturity date

36

What are 3 types of government bonds?

  • municipal bonds
  • US savings bonds
  • Treasure bills

37

What are t-bonds?

  • treasure bonds
  • involve long term borrowing with a maturity of up to 30 years

38

which of the follwoing is not one of the types of US savings bonds discussed in your book and / or class?

 

  • I
  • EE
  • ZZ

ZZ