Personal Finance 1st Edition by Jack R. Kapoor

Exercise 12

1. How would you define (a) a blue-chip stock, (b) a cyclical stock, (c) a defensive stock, (d) a growth stock, (e) an income stock, (f) a large-cap stock, (g) a micro-cap stock, (h) a midcap stock, (i) a penny stock, and (j) a small-cap stock.

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2. Which type of stock could help you obtain your investment and financial goals? Justify your choice.

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3. What sources of information would you use to evaluate a stock issue?

Action Application Use Internet research or library resources to identify a stock that could help you obtain your investment goals.

Step 1 of 3

1. Type of Stock	Characteristics of This Type of Investment
Blue chip	A safe investment that generally attracts conservative investors.
Cyclical	A stock that follows the business cycle of advances and declines in the economy.
Defensive	A stock that remains stable during declines in the economy.
Growth	A stock issued by a corporation that has the potential of earning profits above the average profits of all firms in the economy.
Income	An investment that pays higher-than-average dividends.
Large cap	A stock issued by a corporation that has a large amount of capitalization in excess of $10 billion.
Micro cap	A stock issued by a company that has a capitalization of $300 million or less.
Mid cap	A stock issued by a corporation that has capitalization of between $2 and $10 billion.
Penny stock	A stock that typically sells for a low price often defined as $1 or less per share (or in some cases, less than $5 per share).
Small cap	A stock issued by a company that has a capitalization of between $300 million and $2 billion.