Study Questions

Question 3. Pages 684-685

Bond Price Interest Yield, %

$8,000 10.0

$9,000 8.9

$10,000 8.0

$11,000 7.3

$13,000 6.2

What generalization can be drawn from the completed table?

Bond price and interest rate

Question 3 and 4. Page 704

3. How do stocks and bonds differ in terms of the future payments that they are expected to make?

Stock and bonds differ from the stock being yours for whatever company you have stock with, it can be profitable or not profitable, you take the loss if anything happens to the company. With bonds it’s a debt contract. The company gives an amount and length of time for payments.

Which type of investment (stocks or bond) is considered to be more risky?

I believe stocks would be more risky because you don’t know what the outcome of the company is going to be.

Given what you know, which investment (stocks or bonds) do you think commonly goes by the nickname “fixed income”?

I think it would be bonds.

4. Mutual funds are very popular. What do they do? What different types of mutual funds are there? And why do you think they are so popular with investors?

Mutual funds are popular in many reasons. They are less risky to invest your money in. There are many different types of mutual funds such as money market funds, fixed income funds, balance funds, and equity funds. Some are safe investments and some are risky investments. There popular with investors because it allows them to build up slowly a steady retirement income.