Investing and Finance Quiz
The interest rate the Federal Reserve charges banks for short-term loans is the:
- The discount rate is what the Federal Reserve charges to banks for short-term loans. The prime rate is what banks charge preferred borrowers, while a periodic rate refers a changing rate used by some credit card companies.
In addition to setting interest rates, the Federal Reserve affects monetary policy through open market operations, which are the:
- Open market operations are the buying or selling of U.S. government securities to increase or decrease the amount of money in circulation. The money received from the sale of securities is taken out of circulation, reducing the money supply. When the Federal Reserve buys securities, it returns money to circulation.
The primary purpose of the International Monetary Fund is to:
- Established in 1944, the International Monetary Fund is designed to promote international monetary cooperation.
The strategy of investing in different kinds of assets to reduce risk is called:
- When investments are spread among various types of assets (stocks of different companies, bonds, treasury bills, bank accounts, etc.) it is said to be a diversified portfolio. Dollar cost averaging is the purchase of a stock, or mutual fund, with a specific amount of money at specified intervals (usually monthly).
A zero coupon bond would:
- A zero coupon bond would pay no interest until it reached maturity.
When purchasing corporate bonds, investors:
- A bond is simply an IOU, promising to repay the loan with interest, issued by a government entity or a corporation. Corporate bonds are generally taxed as ordinary income, while government bonds are usually tax free. Preferred stock pays a fixed dividend, but lacks voting rights.
A brass plate bank is:
- The so-called brass plate, or shell, banks have no physical presence. They conduct business over the phone, through the mail, by fax, or over the Internet. These banks are almost always licensed by offshore banking centers and are popular with those seeking considerable privacy.
Many financial advisers recommend DRIPs, which are:
- Dividend reinvestment plans take the dividend paid by a particular stock and use it to purchase more shares of that stock, rather than paying it to the shareholder. It is an easy way to buy more shares of stock, if you do not need the dividend income.
Offshore banks are:
- Offshore banks are licensed by nations with low taxes and limited financial regulations. There are some 4,000 offshore banks with some $5 trillion in assets located all over the world.
Beta measures the:
- Beta measures how the price of a particular stock fluctuates in relation to the whole stock market. Stocks with a beta of more than 1 are volatile, fluctuating more than the general market. Stocks with a beta of less than 1 are expected to fluctuate less than the overall market.