456 chapter 16 stocks and bonds to reinforce your

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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 phrase. 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 the bond. 5. A(n) ______ bond is a bond issued by a state or local government. 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 and sold. 4. Why did Charles Dow create the Dow Jones Industrial Average? 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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