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Unformatted text preview: higher the price.
The yield on the bond is the coupon payment
divided by the price paid for the bond. Section 3
In a futures contract, a seller agrees to provide
a particular good to the buyer on a specified
future date at an agreed-upon price.
An option is a contract giving the owner the
right, but not the obligation, to buy (a call
option) or sell (a put option) shares of a particular good at a specified price on or before a
specified date. 456 Chapter 16 Stocks and Bonds To reinforce your knowledge of the key terms in
this chapter, fill in the following blanks on a separate piece of paper with the appropriate word or
1. If a person buys Spyders, she is buying a stock
index, sometimes referred to as buying ______.
2. The ______ of a stock is the dividend divided
by the closing price.
3. A(n) ______ is an IOU, or a promise to pay.
4. The ______ on a bond is equal to the annual
coupon payment divided by the face value of
5. A(n) ______ bond is a bond issued by a state or
6. The federal government issues bonds of different maturities. Bonds with a maturity of 2 to 10
years are called ______.
7. A(n) ______ is a contract in which the seller
agrees to provide a particular good to the buyer
on a specified future date at an agreed-upon
price. Understanding the Main Ideas
Write answers to the following questions to review
the main ideas in this chapter.
1. What is the purpose of financial markets?
2. If you buy a stock are you lending money to the
company issuing the stock, or are you buying
ownership in the company?
3. Name three places where stocks are bought
4. Why did Charles Dow create the Dow Jones
5. What does it mean if the Dow Jones Industrial
Average rises by, say, 100 points in a day?
6. What are the two reasons to buy stock?
7. What determines the price of a stock?
8. What does it mean if someone invests in a
mutual fund? In a stock index fund?
9. “The stock market may not be the best place to
put your money in the...
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- Winter '14