Chapter13 - assets a Book value has to do with the value of...

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Matt Serna Mr. Mckenzie Personal Finance November 21, 2010 Chapter 13 1. Four reasons why someone should invest in stock a. Over time common stocks outperform all other investments b. Stocks reduce risk through diversification c. Stocks are liquid d. The growth of your investment is determined by more than just interest rates. 2. What is a stock split? a. Increasing the number of stock shares outstanding by replacing the existing shares of stock with a given number of shares. 3. How does the concept of book value relate to the concept of claim on
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Unformatted text preview: assets? a. Book value has to do with the value of assets, and claims on asset has to do with if the firm goes bankrupt. 4. When should a stockholder receive payment when a company declares bankruptcy? a. The stockholder is plain out of luck 5. Two ways an investor can reduce risk when purchasing stock a. Use Principle 1, The Risk Return Trade Off b. Use Principle 3, Diversification Reduces Risk i. Simply lets say you have $20,000, spread out that 20K so you don’t put all of your money into 1 jar....
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