COA 4131 1st Edition Final Exam Study Guide Lectures 22 34 Lecture 22 1 What are the four steps in investing The four steps in investing include setting goals and developing an investment attitude assessing risk and return selecting instruments and allocating assets and managing investments 2 Define the following terms current yield total return and investment risk Current yield is the bond as an investment at market price Total return is dividends or interest and cannot be predicted Investment risk is the theoretical risk of loss from an inflation of a possible investment 3 When selecting investments and allocating assets what steps should be taken When selecting investments and allocating assets one should put assets into different categories and diversify them Diversity is important because if you spread them all out the risk is spread into different categories 4 Give some examples of safe stocks that give you dividends Coca Cola General Electrics P G Johnson Johnson 5 What is the most difficult part of investing The most difficult part is knowing when to sell the investment 6 Who should be involved in investment decisions and processing buy and holds Investment decisions should be spread by asking other people spreading knowledge to find out as much information as you can and perhaps hiring professionals to buy and sell your stocks 7 What are bonds considered on the investment chart Bonds are considered more conservative and safer 8 Where are emerging markets located Emerging markets are located in South America Asia and Africa Lecture 23 1 Explain savings The goal of savings is to collect funds in a risk free conservative manner based on interest over time Savings accounts pay a low rate of interest as well 2 Explain bonds Bonds are investments involving lending money to organizations for a period of time These can be corporate or governmental Corporate bonds come from different companies while government bonds are written pledges of a government of municipality to repay a specific amount of money plus interest 3 Describe dividends mutual funds and money markets Dividends are distributions of money from a corporation or government to investors Mutual funds are groups of stocks bonds or other securities managed by an investment company Money market instruments mean that you lend money to an organization such a bank or the government and offers security and liquidity 4 What are the general rules of real estate The general rules include that real estate increases in value although there are no guarantees location and timing are important and real estate is less liquid than other forms of investments 5 What are other types of investments Social security company pensions large holdings and your own business are other types of investments Lecture 24 1 When is the right time to invest There is no definitive right time to start investing when you feel you are financially ready and have extra money and time then you are ready Also the younger you are the more risk you can take because you have more time to gain it back 2 What is investment risk Investment risk is the chance the actual return will be different than you anticipated 3 Explain the difference between high risk and low risk High risk is the potential for above average returns Low risk is much safer and have a lower potential for high returns 4 How do women fare in investing Women tend to underinvestment compared to men so they should be pushed invest more 5 What is the main reason one would join an investment club People would join an investment club to gain knowledge and learn more about stocks and the investment process 6 What advice is given to beginners investing As a new investor you should know your risk level investigate online hope that your money investing will turn out positively stay in the course invest diversify accumulate and sell 7 What is considered an aggressive investment A conservative investment An aggressive investment is a stock while a conservative investment is a bond 8 How much would you get back if you put 1 000 in Boston Market in 1995 If 1 000 was put in Boston Market in 1995 then you would get 175 back 9 What are the four main types of mergers The different mergers include cumulative participating preferred stock adjustable rate preferred and convertible preferred Lecture 25 1 Explain the two stock classifications The two stock classifications are blue chip stocks cyclical stocks defensive stocks growth stocks growth stocks income stocks and speculative stocks 2 What are blue chip stocks Blue chip stocks are the most valuable stocks and are based on the history of the company They pay dividends and have high quality management Examples include WalMart General Electric and McDonald s 3 How are blue chip stocks and speculative stocks related They are related because some companies that are considered blue chip stocks today were once speculative stocks in the past For example Dell and Microsoft were speculative when they were brand new and they are blue chip stocks now 4 When was the first stock considered Dow Jones Industrial Average The first one was named in 1928 5 What is the difference between bull and bear market While bull market is when the market is up bear market is when the market goes down 6 Explain the main numerical measure that is reported and focused on most Price Earnings ratio PE is the price of one shared stock versus annual earning of the whole year and if it is low It is more secure and stable A good PE is between 5 and 20 while a new young and experimental PE is between 60 and 100 7 Describe market order limit order stop order rounds lots and odd lots Market order is the price in the market at the very time limit order is a specific price that will not be changed stop order is when it is sold below a wanted price round lots are buying things in clusters and odd lots are buying each one at a time 8 What should be used first short term or long term investment strategies Long term strategies should be used first before short term strategies Lecture 26 1 What do pets have to do with the economy As the economy rises the number of pets being bought goes up 2 What are the two types of bonds The two types of bonds are corporate and government 3 What is a good deal for determining the market 7 5 is a good deal 4 How do investors purchase corporate bonds Investors purchase through diversity different buying and selling going to account executives or banks and paying fees with the
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