Financial Planning and Investment Test 2

Financial Planning and Investment Test 2 - Financial...

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Financial Planning and Investment 1. Explain the difference between a financial asset and real asset. A financial asset represents a financial claim on an asset that is usually documented by some form of legal representation. A real asset represents an actual tangible asset that may be seen, felt, held, or collected. 2. Explain the Tax Relief Act of 2003. The Tax Relief Act of 2003 changed tax considerations related to investments substantially. For high-income, high-tax-bracket investors this made stocks with large capital gains potential much more desirable. The act put dividends and long-term capital gains on an equal footing. 3. Explain risk, beta, and systematic risk. a) The risk for an investment is related to the uncertainty associated with the outcomes from an investment. b) Beta measures the risk of a security relative to the market. c) Systematic risk is risk inherent in an investment related to movements in the market that cannot be diversified away. 4.
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Financial Planning and Investment Test 2 - Financial...

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