Personal Finance Unit 4

Topics: Bond, Investment, Mutual fund Pages: 4 (1192 words) Published: December 5, 2011
Brittany James
FIN 1100
Module 4 Home Work Assignments
[Answer all questions in details]
1.|Matthew Boyd asks for your help! He has saved $10,000 and wants to invest in common stock.
Choose one of the long-term or short-term techniques described in this chapter and - long term technique: Dollar cost averaging
explain how that method could help Matthew achieve his investment goals. - this method Dollar cost averaging is a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals. This could help Matthew, because he could avoid the common pitfall of buying high and selling low. He could make money if the stock is sold at a price higher than the average cost for a share of stock. | 2.|Describe why corporations issue common stock.

-corporations issue common stock to finance their business start up costs and help pay for expansion and their ongoing business activities.
Describe why investors purchase common stock.
- Because investors want larger return than those that more conservative investments offer.| 3.|How do interest rates in the economy affect the price of a corporate bond? -An increase or decrease in interest rates can affect the price of a bond.The value of a bond may also be affected by the financial condition of the company or government unit issuing the bond, the factors of supply and demand, an upturn or downturn in the economy, and the proximity of the bond's maturity date.| 4.|What is the primary difference between common stock and preferred stock? -Preferred stock is a type of stock that gives the owner the advantage of receiving cash dividend before common stockholders are paid any dividends.| 5.|Bob and Mary Martin are both 35 years old. And although they graduated from college almost 15 years ago, they have never developed a diversified investment program. What extra money they had was invested in high-tech stocks that did quite well until the last...
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