Stock and Bond Flashcards
(26 cards)
What is a stock?
A stock represents a share in the ownership of a company.
What is a bond?
A bond is a fixed income instrument that represents a loan made by an investor to a borrower.
True or False: Stocks typically provide fixed returns.
False
What is the primary purpose of issuing stocks?
To raise capital for the company.
What is the difference between common stock and preferred stock?
Common stock usually comes with voting rights and variable dividends, while preferred stock typically has fixed dividends and no voting rights.
Fill in the blank: Bonds are often considered _____ investments compared to stocks.
safer
What is the term for the interest rate that a bond issuer pays to bondholders?
Coupon rate
True or False: Stocks are generally considered less volatile than bonds.
False
What does it mean when a bond is called?
It means the issuer has decided to pay back the bond before its maturity date.
What is market capitalization?
The total market value of a company’s outstanding shares of stock.
What is a dividend?
A dividend is a portion of a company’s earnings distributed to shareholders.
What is the primary risk associated with investing in stocks?
Market risk or the risk of losing value due to market fluctuations.
What does ‘issuer’ refer to in the context of bonds?
The entity that issues the bond and is responsible for paying back the principal and interest.
Fill in the blank: A _____ bond is issued by a corporation.
corporate
What is the yield of a bond?
The income return on an investment, expressed as a percentage of the investment’s cost.
True or False: Bonds are typically riskier than stocks.
False
What is a stock market index?
A statistical measure that represents the value of a section of the stock market.
What does it mean for a stock to be ‘overvalued’?
It means the stock’s price is higher than its intrinsic value.
What is a mutual fund?
An investment vehicle that pools money from multiple investors to purchase a diversified portfolio of stocks and/or bonds.
What is an initial public offering (IPO)?
The process through which a private company offers shares to the public for the first time.
Fill in the blank: A _____ is a bond that is issued by the government.
government bond
What is the significance of a bond’s maturity date?
It is the date when the bond’s principal amount is repaid to the bondholder.
What is a stock split?
A corporate action in which a company divides its existing shares into multiple new shares to boost liquidity.
True or False: The price of a bond generally increases when interest rates rise.
False
