Exam 12: Investing in Stocks and Bonds

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. -Most purchasers of [Treasury | municipal] bonds invest in them because of their tax-free interest.

A premium bond sells at par value.

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. -Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

The relevant sale or invoice price of a bond to the buyer is its

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose? (Show all work.)

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. -A [cyclical | defensive] stock's price would tend to move in the same direction as the entire market.

Bond prices are impacted by both the direction and magnitude of interest rate changes.

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 commonly-cited price for a bond is usually its [clean | dirty] bond price.

All treasury bonds issued today are non-callable.

Total investment return can be approximated using the current yield.

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

Stock dividends are taxed at Long Term Capital Gains Rates.

When cash dividends on stock are paid,but the stockholder has these dividends automatically reinvested,what are the federal income tax implications?

A bond selling below par value is selling at

The value of a stock at any time is a function of future returns rather than of past performance.

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

____ risk results from the behavior of investors in the securities market

You received a stock dividend this year instead of cash.This is taxable income.

A bond is quoted as Lging 8 ¹/₂ with a close of 106.Which of the following statements are true about this bond?

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 possibility that a corporation might fail is [economic | business] risk.