Your Questions About Stocks And Bonds

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Michael asks…

How bonds,stocks and mutual funds affect the banking system?

or what effect they made to the banking system

financi4 answers:

Mutual funds are just a collection of stocks. Stocks and mutual funds are not fixed income investments. This means the investor is not garenteed his principal/gains unless he ‘realizes’ or sells his stocks for profit.

Bonds are ‘fixed’ income because you are garenteed both your principal and the interest. You don’t run the risk of losing your investment due to market depriciation or lack of judgment.

When the economy/market is doing great, more people want to buy stocks, because the reason the economy would be doing great is because many companies are doing great. Because more people are buying stocks, stock prices appreciate and rise. This results in a general uptrend or ‘rise in prices’ for the market.

When the economy/market is doing bad, more people want to sell stocks, because the reason the economy is doing bad is because many companies are doing bad. Because more people are selling stocks, stock prices depreciate or decline. This results in a general downtrend or ‘decrease in prices’ for the market.

When the economy is doing good, stock prices go up, you’ll see more people putting their money in stocks. When stock prices are going down, people want to look for ‘safe havens’ to put their money. So you’ll see more people buying bonds, and other safer investments like commodities (oil, gold, food).

Chris asks…

An inverster bought $45000 in stocks, bonds, and money ,arket funds. The total invested bonds and money…?

market funds was twice the amount invested in stocks. The return on the stocks, bonds, and money market funds was 10%, 7% and 7.5%, respectively. The total return was $3660. How many was purchased of each?

financi4 answers:

A simpler & less error prone way
————— ——————————-

1/3 of $45000 = $15000 is invested in stocks @10% & yields $1500

(3660-1500) = $2160 need to be earned from remaining $30,000

if invested @7% in bonds, it would yield only $2100

every $1000 invested instead @7.5% in the money market will yield an extra $5

to yield the extra $60 needed , $12,000 need to be invested in the money market

ans: $15,000 , $18,000 & $12,000 resply.
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