Exam 12: Investing in Stocks and Bonds

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -Tax on capital gains is paid [as the stock appreciates | in the year the stock is sold].

Julie Johnson is in the 31 percent tax bracket.If she were to purchase a $1,000 municipal bond that had a stated interest rate of 6.5%,the taxable equivalent yield would be

One would prefer a stock with steadily increasing earnings per share and return on equity.

The higher the tax bracket you are in,the more attractive the purchase of municipal bonds becomes.

To most stockholders,the main advantages of common stock investment are

One of the more appealing features of a common stock is that stock investments

The returns you expect from securities are income and growth.

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%,the taxable equivalent yield would be

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -You would expect the higher rate of interest from a bond with a [AAA | C] bond rating.

Blue-chip stocks are expected to pay dividends more regularly than growth stocks.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -The usual face value of a corporate bond is [$1,000 | $500].

Earnings per share can be defined as the return earned on behalf of each share of common and preferred stock,calculated by dividing all earnings by the total number of shares outstanding.

Bonds rated AA by S&P and Aa by Moody's would be investment quality.

Market risk is often measured using

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement.Select A for the first item,B for the second item,and C if neither item will correctly complete the statement. -[Raising | Lowering] a bond rating will result in higher current yields.

Junk bonds have higher risk and similar returns to investment grade bonds.

Which of the following are characteristic of Treasury inflation-indexed bonds?

Security investors incur varying degrees of risk.Business risk is related to

In most investments,there is a risk-return tradeoff.

All securities involve risk of some kind.