1. Bonds are fancy IOUs. Companies and governments issue bonds to fund their day

Question

1. Bonds are fancy IOUs. Companies and governments issue bonds to fund their day-to-day operations or to finance specific projects. When you buy a bond, you are loaning your money for a certain period of time to the issuer. In return, bond holders get back the loan amount plus interest payments.
Why might you choose to invest in a bond instead of the stock market?



2. When you invest in stocks, it is said to “buy low and sell high.” Explain what this means and why you would want to follow this advice.




3. The New York Stock Exchange is the largest stock market in the world. What happens at a stock exchange?



4. Why do companies issue stocks?



5. What is a mutual fund a collection of?

Explanation / Answer

1) mutual funds 2) It means that you should buy a specific number of stocks when the price of stock is low and sell the same stocks when the price of the stocks is high. This yields profit. 3) Trading of stocks takes place in a stock exchange 4) companies issue stocks to generate money from the market. Value of stocks also indicate the current status of the company. 5) Many stocks of different companies.

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