Dan Wanted to Start Investing Some of His Monthly Earnings

question 230

Multiple Choice

Dan wanted to start investing some of his monthly earnings in stocks.He planned to diversify his holdings between blue chips,growth,and income type stocks.After consulting with a financial planner,he now understands the difference between these three types.The difference is:

• A)Blue chips are the greatest gamble.They are highly speculative.Growth stocks are shares of companies that are well established with lots of earnings,paying lots of dividends.Income stocks pay steady dividends,but the value of the stock usually fluctuates more than other shares.
• B)Blue chips are the shares of established companies that more than likely have had strong earnings for several years,and have a long history of dividend payments.Growth stocks are the shares of newer,fast growing companies that seldom pay dividends.Examples of income stocks are utility companies that pay sizeable dividends.
• C)Blue chips are highly speculative,and usually consist of technology and energy stocks.Growth stocks are the shares of very established companies that have experienced significant growth over their extended life.Income stocks are stocks that have experienced several Stock Splits due to the fluctuation of high and low share prices,over a short period of time.
• D)The only difference between blue chips and income stocks is that blue chips pay dividends,whereas income stocks do not.The investor makes money when the prices of income stocks appreciate and he/she trades the stocks to another investor.Growth stocks are young companies that are high-risk ventures because their shares seldom trade above $10 per share.