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Anika [276]
2 years ago
6

100 Points PLEASE HELPPPPPPP

Mathematics
1 answer:
DENIUS [597]2 years ago
8 0

Answer:

Step-by-step explanation:

1. If you buy a company’s stock,

A. you own a part of the company.

2. If you buy a company’s bond,

B. you have lent money to the

company.

3. Over the past 70 years, the type of

investment that has earned the most

money, or the highest rate of return, for

investors has been

A. stocks.

When you own stock, you own a part of

the company. There are no guarantees of profits,

or even that you will get your original investment

back, but you might make money in two ways.

First, the price of the stock can rise if the

company does well and other investors want to

buy the stock. If a stock’s price rises from $10 to

$12, the $2 increase is called a capital gain or

appreciation. Second, a company sometimes pays

out a part of its profits to stockholders—that’s

called a dividend. If the company doesn’t do

well, or falls out of favor with investors, your

stock can fall in price, and the company can stop

paying dividends, or make them smaller.

When you buy a bond, you are lending

money to the company. The company promises

to pay you interest and to return your money on

a date in the future. This promise generally

makes bonds safer than stocks, but bonds can be

risky. To assess how risky a bond is you can

check the bond’s credit rating. Unlike

stockholders, bond holders know how much

money they will make, unless the company goes

out of business. If the company goes out of

business, bondholders may lose money, but if

there is any money left in the company, they will

get it before stockholders.

If you had invested $1 in the stocks of

large companies in 1925 and you reinvested all

dividends, your dollar would be worth $2,350 at

the end of 1998. If the same dollar had been

invested in corporate bonds, it would be worth

$61, and if it had been invested in U. S. Treasury

bills, it would be worth $15. (This information

came from Ibbotson Associates, Inc.)

One of the riskiest investments is buying

stock in a new company. New companies go out

of business more often than companies that have

been in business for a long time. If you buy

stock in small, new companies, you could lose it

all. Or the company could turn out to be a

success. You’ll have to do your homework and

learn as much as you can about small companies

before you invest. If you decide to buy stock in

a new or small company, only invest money that

you can afford to lose.

One of the most important ways to lessen

the risk of losing money when you invest is to

diversify your investments. It’s common sense

— don’t put all your eggs in one basket. If you

buy a mixture of different types of stocks, bonds,

or mutual funds, your entire savings will not be

wiped out if one of your investments fails. Since

no one can accurately predict how our economy

or one company will do, diversification helps you

to protect your savings.

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