Multiple Choice
Which of the following securities is exempt from registration under the Securities Act of 1933?
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7. Receivables and Investments
Introduction to Investments in Securities
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Why might an investor choose to invest in income stocks rather than growth stocks?
A
Income stocks typically have higher potential for rapid capital appreciation.
B
Income stocks rarely pay dividends to shareholders.
C
Income stocks provide regular dividend payments, offering a steady income stream.
D
Income stocks are generally riskier and more volatile than growth stocks.
Verified step by step guidance1
Understand the difference between income stocks and growth stocks. Income stocks are shares of companies that pay regular dividends to shareholders, providing a steady income stream, while growth stocks are shares of companies that reinvest profits to fuel growth and typically do not pay dividends.
Recognize the primary appeal of income stocks. Investors may choose income stocks for their regular dividend payments, which can be particularly attractive for individuals seeking consistent income, such as retirees.
Compare the risk and volatility. Income stocks are generally considered less risky and less volatile compared to growth stocks, as they are often associated with established companies in stable industries.
Evaluate the trade-off between capital appreciation and income. Growth stocks have higher potential for rapid capital appreciation, but they do not provide immediate income, whereas income stocks prioritize steady income over rapid growth.
Consider the investor's financial goals and risk tolerance. An investor seeking a reliable income stream with lower risk may prefer income stocks, while an investor aiming for long-term capital growth and willing to accept higher risk may opt for growth stocks.
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