COPYRIGHTED MATERIAL
ARE YOU FINANCIALLY LITERATE? CHAPTERS 12-14
10. The venture capitalists are tired of stressing out about risky investments. They’ve decided to get out of the venture capital business altogether in favor of low risk investments – a complete 180 of their investment philosophy! In fact, they named their new company Philosophy 180. They decide to invest in securities . What are securities? Are there different kinds of? Explain. _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ 11. Philosophy 180 members aren’t getting any younger. They are looking for investments with reliable income and little risk. They check out bonds. They notice that some are rated AAA , on down to C and D . What is the purpose of a bond rating ? What do these grades tell them? _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ 12. Philosophy 180 considers investing in treasuries . What kinds are there? Are they low or high risk investments? Why does the government sell treasuries. _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ 13. NTENS Sports n Stuff has gone public. Philosophy 180 buys 100,000 shares. A few months later, they sell (“trade”) the shares for a profit. Where did these shares go? Did they revert to NTENS? _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ _ ____________________________________________________________________ A security is a tradable financial instrument that represents financial value . Equity securities are shares in a corporation . Debt securities are called notes and bonds. Bonds are assigned a letter grade based on the level of risk and credit – worthiness of the issuer. There is a range of ratings from AAA, which is a high rating to D for “Default.” C refers to a low quality (high-risk bond), aka junk bond . The federal government issues bills, notes and bonds for sale to the public. It is how the US Government funds payment on its debts. They are called treasuries because they are issued by the U.S. Treasury Department. They are very low risk . Shares do not revert to the issuing corporation for resale . They are purchased by another buyer who happens to be looking to own that particular security. They may change hands indefinitely through trading. PRODUCT PREVIEW
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Assessment 280
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