1. Investment Strategies
Chapter 11 Section 1

2. I. Basic Investment Considerations
A. High risk investments pay higher rates of return.
B. The type of investment chosen depends on the goals of the investor.

3. C. Consistent investing can yield large returns.

4. A 401(k) plan is a tax-deferred investment plan that acts as a personal pension fund for employees.

5. Question
What factors should be considered when investing money?

6. II. Bonds as Financial Assets
Bonds have three main components: the coupon, the maturity, and the par value.

7. Example
A corporation sells a 6 percent, 20-year, 1,000 dollar par value bond that pays interest semi-annually.
The coupon payment would be (.06 *1,000)/2
Or 30 dollars twice a year
At the end of 20 years the original 1,000 would be repaid.

8. Question
What is a bond?
a long-term obligation by the government or a corporation to pay a fixed amount of interest every year for a specified number of years

9. III. Bond Ratings
Bond ratings, ranging from D (lowest) to AAA (highest), indicate the quality of the bond.

10. Question
What characteristic do bonds and other investments have in common?
the higher the risk on the bond, the bigger the return

11. IV. Financial Assets and Their Characteristics
Corporate bonds are issued by corporations and are usually used for long-term investment.
Municipal bonds are bonds issued by state and local governments.

12. Savings bonds are low-denomination, nontransferable bonds issued by the federal government.