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. -When a bond is sold between coupon payment dates,the [buyer pays the seller | seller pays the buyer] for the accrued interest.

Municipal bonds can be attractive investments,despite their lower interest rate,since their interest income is exempt from federal income tax.

The callable feature of a bond protects the issuer when current rates are falling.

Monte Jackson is considering the purchase of XYZ stock and would like to estimate its approximate yield if he holds it 5 years.The current price is $20 and Monte expects it would rise to $30 over the 5-year holding period.The expected dividend is $1.00 each year.(Show all work.)

A callable bond allows the issuer to retire the security prior to maturity.

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. -Dividend income is taxed [as ordinary income | at capital gains rates].

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 longer money is not invested during the best months,the [higher | lower] is the percent return.

Market risk is often measured using

Stock profitability is often measured by

Bonds issued by subdivisions of the U.S.government but not guaranteed by the government are called

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 safest bond you could purchase would be a [corporate | Treasury] 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. -Preferred stockholders will receive their share of company earnings [before | after] bond interest is paid.

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

A bond with a yield to maturity that equaled or exceeded an investor's desired rate of return is considered an attractive investment.

Your convertible bond has a conversion ratio of 15 shares.Current market price of the common stock is $50/share.The conversion value of this bond is

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 lower a stock's beta,the [less | more] volatile you can expect its price fluctuations to be.

Companies with a great deal of long-term debt would rate fairly high in ____ risk.

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. -Zero-coupon bonds would be more appropriate for a [tax-deferred retirement account | taxable account].

Positive aspects about bonds do not include

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].