Answers26-27 Ignite Economics-KY-EconomicsInvesting and Financial Markets

Investing and Financial Markets Answers

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1
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Which statement best describes how an investor makes money off debt?

A
An investor makes money by issuing bonds.
A
An investor makes money by earning interest.
A
An investor makes money by raising capital.
A
An investor makes money by being repaid for the principal.
2
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If a company pays dividends on a stock, does that mean that the stock has appreciated in value? Why or why not?

Y
Yes, the payment of dividends indicates that a stock’s value has increased.
N
No, the payment of dividends indicates that a company has earned profits.
Y
Yes, the payment of dividends indicates that a company’s assets have grown.
N
No, the payment of dividends indicates that a company can repay investors.
3

What can be traded in a commodities market?

A
stock
B
bonds
C
oil
D
debt
4

Bonds are considered to offer a guaranteed return, as they must be honored by law, but which is still a potential risk that investors face?

A
The issuer may not raise enough capital.
B
The issuer could refuse to pay dividends.
C
The issuer could go bankrupt.
D
The issuer may not make a profit.
5

best

T
They both use taxes to support a country’s growth.
T
They both invest money to earn a profit.
T
They both receive capital to use for growth.
T
They both act as angel investors for start-ups.
6

How do bonds generate income for investors?

A
Bonds depreciate in value.
B
Bonds protect investors from bankruptcy.
C
Bonds pay interest to the bank that sold the bond.
D
Bonds pay a specified amount to the investor at maturity.
7

Are the buying and selling of stocks centralized activities? Why or why not?

A
Yes, the New York Stock Exchange is the primary exchange for all the world’s most important trades.
B
No, people can buy stocks anywhere, and they do not need to go through a market.
C
Yes, the world’s stock markets are coordinated exchanges, and they are dependent on one another.
D
No, there are many stock markets around the world, and they are independent of one another.
8

Capital appreciation refers to

t
the increased value of an asset.
t
the ability to make a profit from owning stock.
t
the distribution of earnings to shareholders.
t
the profitable sale of shares.
9

Which factors can affect a stock’s price? Check all that apply.

A
market performance
B
the company’s financial health
C
the quantity products produced
D
location of the company
E
the economy
10

best

b
by earning interest
b
by selling the asset for a profit
b
by raising capital
b
by growing the asset

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