Chapter+11+HW

1. Investing promotes financial growth because when people deposit money in savings account in a bank, for example, the bank may then lend funds to businesses. 2. Savers, borrowers and financial intermediaries are institutions that help channel funds from savers to borrowers contributing to the financial system. 3. Three roles of financial intermediaries are saving, loans, and mutual funds. 4. If you can gain a lot of money in return on an investment you must have taken a higher risk because the higher the risk the higher the reward. 5. A student with $500 in a savings account is participating in the American Financial System because they are saving money with a bank and are allowing the transfer of money between them to take place. 6. When considering to let Bill borrow $50 he has offered to pay interest on the loan i would consider a date to when he will pay me by and if he doesn't pay then it will go up $2 a day. If it was $100 he owed me i would say $5 a day if he doesn't pay me after the due date i say. 7. I would ask them whats the risk of not saving? I would ask whats the return on my savings if i save for a year? I would lastly ask about liquidity and how much i would get in return. 8. Risks and returns of a savings is you might not make enough but return is you have money for a long time. A certificate of deposit you could loose money but you could also gain good credit. The risk of your neighbors successful pet care service would be a lot of animal noise but the reward would be they might give you a good deal if your animal needs service.
 * 11.1 HOMEWORK Read pages 271-275. Answer Questions # 1-8**

1. Bonds are when you loan the government money and you can make money off them because of the coupon rate, and the maturity. 2. Bond ratings are useful to investors because they can check the bond quality through firms that publish bond ratings which help investors know where they should put their money. 3. 1) Savings bonds are low denomination bonds issued by the U.S Government. 2) Treasury Bonds offer different lengths of maturity. 3) Municipal Bonds finance improvements such as highways, state buildings, libraries, parks, and schools. 4) Corporate Bond is a bond that a corporation that issues to raise money to expand its business. 5) Junk Bonds are a lower-rated, potentially higher-paying bond. 4. Capital Markets are in which money is lent for periods LONGER than a year when money markets is which money is lent for periods of LESS than a year. 5. I would make $20 in maturity over 5 years for a 4% maturity on my $100 bond. 6. I would invest in a municipal bond because i would like to help parks, schools, libraries etc.. 7. I would think a bond with AAA rating would be more expensive because its more popular. 8.
 * 11.2 Read pages 277-283. Answer Questions # 1-8**

1. Two benefits of buying stocks is dividends and capital gain. Two risks of buying stock is, 1) the firm selling the stock may earn lower profits than expected, or it may lose money. 2) The firm might go bankrupt and you loose all your money in the stock. 2. The Dow Jones is the index that shows how certain stocks have traded, The S&P 500 index shows the price changes of 500 different stocks. 3. Two popular indexes of stock performance are The Dow Jones and The S&P 500 4.The three causes of the Great Clash were few families held the majority of the nation's wealth, things were being made when not that many were needed, and people wanted to buy technology such as cars and went into debt. 5. The advantage of electronic trading is you can work comfortably safe at home, and you can trust its accuracy. While the disadvantage might be you might not be able to see as much information as you would going off technology such as visiting companies would be good. 6. The advantage of trading in futures and options are that there is a set price for what you are paying, while the disadvantages are that you might lose money because the price is lower. 7. The three questions I would ask a stockbroker before buying a company's stock are: "What should my 1 year goal be?"; "How has the company been doing in the last 3 years?"; and "Why do you think i should buy?". 8. I would not advise a friend to become a day trader because i think it's too risky, you make money one minute and loose it all the next so why jump into that job. 9. If I was given $1,000 to invest in the stock market, i would put it in Gold because gold is always something good to invest in so i've heard from people, thats what would influence me to put it in gold is word of mouth.
 * 11.3 Read pages 285-292. Answer Questions #1-9**

1. Diversification 2. Capital Gain 3. Coupon Rate 4. Bull Market 5. Investments 6. Financial Intermediaries 7, Junk Bonds 8. Speculation 9. Portfolio
 * May 24 - CH 11 Review pg. 294 #1-9, 11-18**

11. Financial Intermediaries are institutions that help channel funds from savers to borrowers. 12. The higher the rating the less risk is taken. Investors can check bond quality through the firms that publish bond ratings. 13. Stocks are traded online, day trading, stock splits, in the Stock Exchange, The New York Stock Exchange, (NYSE) The OTC market and the Nasdaq are some. 14. Diversification strenghthens one's portfolio because it shows you know the market because you spread out investments to reduce risk. 15. Savings and investments play an essential role in the free enterprise system. When people deposit money in a savings account in a bank, for example, the bank may then lend the funds to businesses. Investments promotes economic growth and contributes to a nations wealth. 16. 17. 18.