1st Investors ?'s I Got Wrong

II and IV. Bonds represent a creditor relationship; stock represents an ownership interest. Normally, corporate bonds are issued with a stated rate of interest and mature in 10 or more years. Because of their steady interest payments, bond prices tend to be less volatile than stock prices.

Sale of preferred stock - unlike the other choices, the sale of preferred stock does not entail the assumption of debt and is therefore the least risky. It is always riskier to borrow than it is to raise equity because equity does not have to be paid back.

Ginnie Mae pass through certificates - Ginnie Maes pay interests on a monthly basis, not semiannually

Poor Portfolio management - In an asset allocation portfolio, the investor is dependent on the fund manager’s ability to allocate assets based on market performance. The manager has the authority to choose the percentage of assets that should be directed into stock, bonds, and/or cash, for the purpose of avoiding the other risks listed.

The changes in their price tend to be more related to changes in the cost and standard of living than to changes in bond prices - Investments in common stocks have generally produced a rate of total return that exceeds the rate of inflation over the same period. This tendency cannot, however, be guaranteed to a customer.

A change in the amount of dividend paid out to ABC shareholders - Convertible bonds prices, like the prices of all other debt securities, are directly influenced by interest rates. They are also greatly influenced by the price of the issuer’s common stock because the 2 securities are interchangeable. If a bond’s rating is changed, its market value is affected. Although a change in the dividend payout may affect the market value of the underlying stock, this would factor would have the least direct influence on the price of a convertible bond.

Raise the discount rate - Raising the discount rate discourages borrowers and shrinks the money supply. The FRB has no authority over tax levels. The prime rate and broker call loan rate are determined by banks, not the FRB

The sponsor of the fund, a brokerage firm - The custodian does not sell the shares but provides safekeeping for funds assets. A bank may not be a member of FINRA and therefore may not act as a dealer (although subsidiaries independent of the bank may be set up as broker/dealers).

The number of units remains the same, but the value of each unit changes - During the payout phase of variable annuities, the number of annuity units will remain the same but the value of each unit will vary. It is important to remember that an annuity unit is not the same as an accumulation unit.

Answer is 6.7% - current yield is determined by dividing the annual dividend of $4 ($1 per quarter X 4= $4) by the current stock price of $60 ($4/ $60= 6.7%).

Long term bonds - long-term debt prices fluctuate more than short-term debt prices as interest rates rise and fall

- 7.2% - The annuitant will be credited with the participation rate multiplied by the index’s return-that is, 80% X 9%, which is 7.2%.

Has increased - A stock’s current yield is determined by dividing the annual dividend amount by its current market price. If the dividend amount stays the same while the price of the stock falls, the current yield will increase.

The investor receives principal and interest after the homeowner has paid this money to Ginnie Mae. - The term “pass-through” means that Ginnie Mae has received money from the homeowner and passed it through to the investor

- $6,000 - The shareholder must contribute the full $15,000 , so he owes an additional $6,000. Reinvested dividends and changes in the NAV do not count toward a breakpoint during the period of a letter of intent.