Wednesday, June 25, 2008

Personal Investments - Questions for Further Study

1. Stocks and bonds. Explain the difference between stocks and bonds.

2. Stocks. Explain the difference between blue chip stocks and aggressive growth stocks.

3. Bonds. Explain the difference between government bonds, municipal bonds, corporate bonds, and junk bonds.

4. Risk and rate of return. For each of the following pairs of investments, which has more risk and thus a higher potential rate of return?
a. a U.S. government bond or a U.S. corporate bond.
b. a junk bond or a municipal bond.
c. a blue chip stock or an aggressive growth stock.
d. an aggressive growth stock or a municipal bond.

5. Social Security. The Social Security system was set up so current workers pay taxes that are used to pay benefits to current recipients.
a. Is it fair for you to be asked to pay for debts incurred by previous generations? If so, how much debt is fair and for whom would you be willing to pay?
b. Is it fair for future generations to be asked to pay for debts incurred by your generation?
c. What are the social benefits of the Social Security system? How would society be affected by the reduction or elimination of the Social Security system?

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