In general, which bond would pay a higher interest rate on your investment: a Treasury bond or

a junk bond? Why?

Junk bonds have a lower credit rating than investment-grade bonds, and therefore have to offer
higher interest rates to attract investors.
What benefit to investors does investing in the secondary market have over investing in a
primary market?
Secondary markets promote safety and security in transactions since exchanges have an
incentive to attract investors by limiting nefarious behavior under their watch.
Describe two different types of financial assets and explain how they differ from each other.
What factors determine a bond’s value?
The price of a bond is determined by discounting the expected cash flows to the present using a
discount rate.
Which financial assets are the safest?
Some of the most common types of safe assets historically include real estate property, cash,
Treasury bills, money market funds, and U.S. Treasuries mutual funds.
Why is there overlap among markets for financial assets?
Write a two-paragraph narrative. In paragraph one, describe a person who is wise to invest
money conservatively, or in low-risk investments. What types of investments would they be?
Describe this person’s circumstances and investment goals. In the second paragraph, describe
a person who would be wise to invest money in an aggressive, high-risk portfolio. What types of
investments would this person buy? What might this person’s circumstances and investment
goals be? Explain why each is wise in making very different types of investments, on the basis
of each one’s situation and goals.