Question

unit 5:
word bank: mutual fund, mutual funds, stocks, start - up, owe, lower, certificates, bonds, higher, treasury, spend, diversify, history

1. in all investments, the higher the risk, the ____________ the potential return... the lower the risk, the ____________ the potential return.
2. one way to reduce your risk in investing is to ____________ your investments. this means that you spread your money around in a variety of different investments rather than investing all your money in one. one way to accomplish this is to invest in a ____________. this type of investment pools many people’s money and purchases a variety of different stocks.
3. ____________ bonds and __________ of deposit (cd’s) are two of the safest investments you can invest in. __________ are slightly more risky, whereas investing in stocks of ____________ technology firms is one of the most risky investments.
4. ____________ represent ownership in a corporation, whereas ____________ are contracts to repay money plus a specified amount of interest.
5. your payment ____________, meaning your record of having borrowed and repaid loans is included in your credit rating. the amount you __________ is also included in your credit rating. however, the amount you ____________ is not included in your credit rating. remember, warren buffett gave away $37 billion to charity. this act of generosity did not affect his credit rating.

Explanation:

This is a fill - in - the - blank exercise related to investment knowledge, which belongs to the Business discipline, specifically the subfield of Finance. We will solve each blank one by one according to the knowledge of investment and the given word bank.

Question 1

In investment, there is a positive correlation between risk and potential return. So the higher the risk, the "higher" the potential return; the lower the risk, the "lower" the potential return.

Question 2

To reduce investment risk, a common strategy is to "diversify" investments. And a mutual fund is a type of investment that pools people's money to buy different stocks. So the first blank is "diversify" and the second blank is "mutual fund".

Question 3

"Treasury" bonds are very safe investments. "Certificates" of deposit (CDs) are also safe. "Bonds" are slightly more risky than treasury bonds and CDs. And "start - up" technology firms' stocks are among the most risky. So the blanks are filled with "Treasury", "certificates", "Bonds", "start - up" in turn.

Question 4

"Stocks" represent ownership in a corporation. "Bonds" are contracts to repay money plus a specified amount of interest. So the first blank is "Stocks" and the second blank is "bonds".

Question 5

Your payment "history" (the record of borrowing and repaying loans) is included in the credit rating. The amount you "owe" (the debt you have) is included. But the amount you "spend" (the money you use for consumption, etc.) is not included. Warren Buffett's charity donation (spending) didn't affect his credit rating. So the blanks are "history", "owe", "spend" in turn.

Answer:

1. higher; lower
2. diversify; mutual fund
3. Treasury; certificates; Bonds; start - up
4. Stocks; bonds
5. history; owe; spend