20. Name several different kinds of bank account. How are they different?

21. Why are bonds somewhat risky to buy, even though they make predetermined payments based on a fixed

rate of interest?

22. Why should a financial investor care about diversification?

23. What is a mutual fund?

24. What is an index fund?

25. How is buying a house to live in a type of financial investment?

26. Why is it hard to forecast future movements in stock prices?

27. What are the two key choices U.S. citizens need to make that determines their relative wealth?

28. Is investing in housing always a very safe investment?

Critical Thinking Questions

29. If you owned a small firm that had become somewhat established, but you needed a surge of financial

capital to carry out a major expansion, would you prefer to raise the funds through borrowing or by

issuing stock? Explain your choice.

30. Explain how a company can fail when the safeguards that should be in place fail.
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