Investment Vehicles and Instruments Flashcards
6 cards from real Investment practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Investment Vehicles and Instruments flashcards as text
What is a preferred stock?
Answer: A class of stock that pays fixed dividends and has priority over common stock in liquidation
Preferred stock pays fixed dividends and has priority over common stockholders in the event of a company liquidation, but typically lacks voting rights.
What is a call option?
Answer: The right to buy a stock at a specified price before expiration
A call option gives the holder the right, but not the obligation, to buy a specified asset at a predetermined strike price before or on the expiration date.
What is a Treasury Inflation-Protected Security (TIPS)?
Answer: A bond whose principal adjusts with inflation to protect purchasing power
TIPS are U.S. Treasury securities whose principal value adjusts based on changes in the Consumer Price Index, protecting investors from inflation erosion.
Which investment vehicle allows you to invest in commodities like gold without physically owning the metal?
Answer: Commodity ETFs
Commodity ETFs track the price of commodities such as gold, silver, or oil, allowing investors to gain exposure without storing the physical commodity.
What is a closed-end fund?
Answer: A fund that issues a fixed number of shares through an IPO and trades on an exchange
A closed-end fund raises capital through an IPO, issuing a fixed number of shares that then trade on a stock exchange at market-determined prices.
What does 'shorting a stock' mean?
Answer: Borrowing shares to sell them now, hoping to buy them back at a lower price later
Shorting a stock involves borrowing shares from a broker, selling them at the current price, and hoping to repurchase them at a lower price to return to the lender and pocket the difference.