Investing, Tenth Edition, Chinese Answer Book341

Chapter 1

1. What is the difference between investing and speculation?

Investing is a long-term strategy that aims to preserve and grow capital by purchasing assets that are expected to appreciate in value. Speculation, on the other hand, is a short-term strategy that seeks to profit from price fluctuations by buying and selling assets quickly.

2. What are the different types of assets?

Assets can be classified into two main types: real assets and financial assets. Real assets include tangible property such as land, buildings, and equipment. Financial assets are claims on real assets or future income, such as stocks, bonds, and mutual funds.

3. What is diversification?

Diversification is the practice of investing in a variety of assets to reduce risk. When assets are correlated, the movement of one asset will affect the movement of the others. By diversifying, investors can reduce the impact of any single asset's performance on their overall portfolio.

Chapter 2

1. What is the difference between a stock and a bond?

A stock is a share of ownership in a company. When you buy a stock, you become a part owner of that company. A bond is a loan that you make to a company or government. When you buy a bond, you are lending your money to the borrower and in return, you receive interest payments.

2. What are the different types of stocks?

There are two main types of stocks: common stock and preferred stock. Common stock represents ownership in a company and carries the right to vote on company matters. Preferred stock does not carry voting rights, but it typically pays a fixed dividend.

3. What are the different types of bonds?

There are many different types of bonds, but the most common are corporate bonds, government bonds, and municipal bonds. Corporate bonds are issued by companies. Government bonds are issued by the federal government. Municipal bonds are issued by state and local governments.

Chapter 3

1. What is the difference between the primary market and the secondary market?

The primary market is where new securities are issued. When a company issues new stock or bonds, it does so through the primary market. The secondary market is where existing securities are traded. When investors buy and sell stocks or bonds, they do so in the secondary market.

2. What are the different types of investment intermediaries?

There are many different types of investment intermediaries, but the most common are brokers, dealers, and mutual funds. Brokers are individuals or firms that execute trades for investors. Dealers are individuals or firms that buy and sell securities for their own account. Mutual funds are investment companies that pool money from investors and invest it in a portfolio of securities.

3. What is the role of the Securities and Exchange Commission (SEC)?

The SEC is the federal agency responsible for regulating the securities industry. The SEC's mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation.

Chapter 4

1. What is the efficient market hypothesis?

The efficient market hypothesis (EMH) is a theory that states that all available information about a security is reflected in its price. The EMH implies that it is impossible to consistently beat the market.

2. What are the different types of market efficiency?

The EMH is typically divided into three levels of efficiency:

Weak efficiency: The current price reflects all past price information.

Semi-strong efficiency: The current price reflects all publicly available information.

Strong efficiency: The current price reflects all information, both public and private, that can be used to make profits.

3. What are the implications of the EMH for investors?

The EMH has several implications for investors. First, it suggests that it is impossible to consistently beat the market. Second, it suggests that investors should

2024-10-16

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