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Investments Final

Terms in this set (25)

A. blue chips- are common stocks of very high quality that have a long and proven record of
earnings and dividends. They offer respectable dividend yields and modest growth potential.
They are often viewed as long-term investments, have low risks, and provide modest
but dependable rates of return
b. income stocks- are issues that have a long and sustained record of higher than average dividends. These are ideal for investors who desire high current income with little risk. Unlike other types of income securities (bonds, for instance), holders of income stocks can expect the amount of dividends they receive to increase regularly over time. One disadvantage with these stocks is their generally low to modest growth potential. In recent years interest rates have remained extremely low so that many stocks have dividend yields exceeding the return on high-quality debt instruments.
c. mid-cap stocks- are stocks with capitalization value between $1 billion and $4-$5 billion.
Mid-caps offer investors attractive return opportunities—they have the sizzle of small-cap stocks without the high price volatility. They also provide characteristics of the big, established stocks. This mid-cap range is probably most appropriate for investors willing to tolerate a bit more risk and price volatility than large stocks. One type of mid-cap stock, a "baby blue chip," has all the characteristics of a regular blue chip, except for size.
d. American depository receipts- (ADRs) are negotiable instruments issued by American banks. Each ADR represents a specific number of shares of stock in a specific foreign company. They are
used as a way to purchase foreign stocks and are traded on U.S. exchanges (for example, the
NYSE) or in the OTC markets; they trade just like shares of American stocks. Beyond the
simplified trading, the investment merits of an ADR are a function of the investment merits of
the foreign company that issued the stock, as well as the value of the dollar relative to the
currency of the foreign company
e. ipos- are initial public offerings of primarily small, relatively new companies. As the name
suggests, these stocks are offered to the public for the first time. IPOs offer a chance to earn
phenomenal capital gains. At the same time, it is very likely that investing in IPO stocks might
result in a loss. As such, these should be considered only by experienced and knowledgeable
investors. IPOs must be considered to be highly risky investments.
f. tech stocks- are issued by companies in the technology sector. Issuing firms produce everything from computers to Internet content. They typically are growth stocks or speculative stocks because they pose considerable risk to the investor. This sector has done extremely well in good times and depreciated significantly in bear markets.