Problem 5
How are risk and return related to investment objectives?
Problem 5
Why do junk bonds offer a higher yield than other types of bonds?
Problem 5
How has the growth of individual online trading affected stockbrokers?
Problem 7
Matthew's parents started saving for his college education when he was born. When Matthew turned \(16,\) he got a part-time job and saved part of his earnings for his college expenses. Compare and contrast the investment objectives of Matthew and his parents and describe the factors that influenced their investment decisions.
Problem 7
Categorizing Information Which of the following are banking financial intermediaries and which are nonbanking financial intermediaries? \- Consumer Finance Company \- Family Life Insurance Company \- First National Bank \- Home Savings and Loan \- Investors' Mutual Fund \- Employee Credit Union \- Employee Pension Fund
Problem 7
Dmitri bought a 1,000 dollars bond at par value with a coupon rate of 5 percent. He determines the yield by dividing the amount of interest he earns by the price. a. How much interest would he earn in the first year and what would be the yield? b. How much interest would he earn in the first year and what would be the yield if he had paid 950 dollars for the bond? What would be the interest and yield if he paid 1,050 dollars?
Problem 7
Rachel paid \(\$ 10\) per share for 100 shares of common stock in her favorite clothing store. a. If she receives 10 cents per share in dividends each year, about how many years would it take her to earn \(\$ 100\) on her investment? b. If the share price increases to \(\$ 11\) in two years and she chooses to sell the stock, how much capital gain would she make?
Problem 8
In 2003, Molly bought a 10 -year Treasury note for 1,000 dollars. The market interest rate was 3.5 percent. In 2005, Molly wanted to sell the note to pay for college expenses. Interest rates had risen to 4.5 percent. How would the change in interest rates affect the price that Molly was likely to receive for her note? Give reasons for your answer.
Problem 8
Ryan owns shares in a single mutual fund that includes stocks and bonds. Maggie invests her money in Treasury bonds, state bonds, and corporate bonds. Joshua invests in shares of stock in five different high-tech companies. Which of these investors best understands the concept of diversification? Give reasons for your answer.
Problem 8
Making Inferences A local bank offers savings accounts that have no minimum balance requirement and pay 3 percent interest per year. Account holders can withdraw any amount of money from their accounts at any time. The bank also offers money market accounts that require a \(\$ 500\) minimum balance and pay 4 percent interest each year. Account holders are allowed two withdrawals per month, but each must be for at least \(\$ 100 .\) Why does the money market account pay a higher interest rate?
