Question 1

What do the terms par (face)value, coupon, and maturity date mean for bonds?

Accepted Answer

Both face value and par value refer to t

Question 2

Discuss how a mutual fund mitigates risks for an investor and also saves him time.

Accepted Answer

Mutual funds allow investors to mitigate

Question 3

Why is asset allocation important for an investor?

Accepted Answer

Asset allocation involves structuring a

Question 4

The net asset value of a mutual fund ________.

Accepted Answer

A) stays fixed and consistent at all times 
B) reflects the value of the holdings of the mutual fund 
C) determines whether or not it is a load fund or a no-load fund 
D) remains unrelated to potential capital gains or losses 
A) stays fixed and consistent at all times 
B) reflects the value of the holdings of the mutual fund 
C) determines whether or not it is a load fund or a no-load fund 
D) remains unrelated to potential capital gains or losses

Question 5

A futures contract ________.

Accepted Answer

A) typically involves individual stocks 
B) is usually held until it expires 
C) is an obligation to purchase the underlying asset 
D) is the same as an options contract 
A) typically involves individual stocks 
B) is usually held until it expires 
C) is an obligation to purchase the underlying asset 
D) is the same as an options contract

Question 6

What are the three main types of corporate bonds and what are their important characteristics?

Accepted Answer

A convertible bond is one that can be ex

Question 7

With stock investing, a capital gain occurs when ________.

Accepted Answer

A) the stock owner is paid dividends without having to sell shares 
B) the stock owner sells the stock for a higher price than he paid for it 
C) the stock owner sells the stock for a lower price than he paid for it 
D) the stock owner receives legal entitlement to physical property of the company 
A) the stock owner is paid dividends without having to sell shares 
B) the stock owner sells the stock for a higher price than he paid for it 
C) the stock owner sells the stock for a lower price than he paid for it 
D) the stock owner receives legal entitlement to physical property of the company

Question 8

List the five main types of stocks and discuss the important characteristics of each.

Accepted Answer

Income stocks pay a good and usually ste

Question 9

Stocks and bonds are collectively known as ________.

Accepted Answer

A) fund generators 
B) securities 
C) the money market 
D) corporate obligations 
A) fund generators 
B) securities 
C) the money market 
D) corporate obligations

Question 10

If you buy a $10,000, five-year corporate bond, what amount will the company pay you in a lump sum at the end of five years?

Accepted Answer

A) $10,000 
B) $10,000 plus the principle amount invested 
C) It's impossible to know before the investment is made. 
D) the interest earned by the $10,000 only 
A) $10,000 
B) $10,000 plus the principle amount invested 
C) It's impossible to know before the investment is made. 
D) the interest earned by the $10,000 only

Question 11

What is the cheapest way for you to buy a stock?

Accepted Answer

A) through a full-service stockbroker 
B) through a discount broker 
C) through your bank 
D) through a New York Stock Exchange broker 
A) through a full-service stockbroker 
B) through a discount broker 
C) through your bank 
D) through a New York Stock Exchange broker

Question 12

A corporate bond that can be exchanged for stock is called a(n)________.

Accepted Answer

A) debenture bond 
B) secured bond 
C) convertible bond 
D) equity bond 
A) debenture bond 
B) secured bond 
C) convertible bond 
D) equity bond

Question 13

In general, the riskier an investment, the greater the opportunity for a large return.

Accepted Answer

A) True 
 B)False

Question 14

A mutual fund is BEST characterized by ________.

Accepted Answer

A) multiple investors in a single bond or stock 
B) multiple investors in a diversified set of bonds or stocks 
C) multiple investors making collective decisions 
D) multiple investors with limited knowledge of the market 
A) multiple investors in a single bond or stock 
B) multiple investors in a diversified set of bonds or stocks 
C) multiple investors making collective decisions 
D) multiple investors with limited knowledge of the market

Question 15

Describe the role that a financial advisory firm fills when a company decides to issue bonds.

Accepted Answer

A financial advisory firm serves as an i

Question 16

What are the main advantages to financing with equity as opposed to bonds? How does a company choose which of the two types of financing to use, or whether or not it should use both?

Accepted Answer

The advantages of equity financing are t

Question 17

What is a capital gain in stock investing?

Accepted Answer

A capital gain occurs when someone buys

Question 18

The STRONGEST factor affecting a company's decision of whether or not to finance with bonds is ________.

Accepted Answer

A) the interest rate 
B) the length of the bond term 
C) the general state of the economy 
D) the success of other companies in raising money 
A) the interest rate 
B) the length of the bond term 
C) the general state of the economy 
D) the success of other companies in raising money

Question 19

Is it possible to have money in a savings account and actually lose purchasing power in the long run?

Accepted Answer

Yes. It all depends on the interest rate

Question 20

A ________ stock will likely suffer the least amount of depreciation in a major recession.

Accepted Answer

A) cyclical 
B) blue chip 
C) growth 
D) defensive 
A) cyclical 
B) blue chip 
C) growth 
D) defensive

Exam 16: Securities and Investments

What do the terms par (face)value, coupon, and maturity date mean for bonds?

Discuss how a mutual fund mitigates risks for an investor and also saves him time.

Why is asset allocation important for an investor?

The net asset value of a mutual fund ________.

A futures contract ________.

What are the three main types of corporate bonds and what are their important characteristics?

With stock investing, a capital gain occurs when ________.

List the five main types of stocks and discuss the important characteristics of each.

Stocks and bonds are collectively known as ________.

If you buy a $10,000, five-year corporate bond, what amount will the company pay you in a lump sum at the end of five years?

What is the cheapest way for you to buy a stock?

A corporate bond that can be exchanged for stock is called a(n)________.

In general, the riskier an investment, the greater the opportunity for a large return.

A mutual fund is BEST characterized by ________.

Describe the role that a financial advisory firm fills when a company decides to issue bonds.

What are the main advantages to financing with equity as opposed to bonds? How does a company choose which of the two types of financing to use, or whether or not it should use both?

What is a capital gain in stock investing?

The STRONGEST factor affecting a company's decision of whether or not to finance with bonds is ________.

Is it possible to have money in a savings account and actually lose purchasing power in the long run?

A ________ stock will likely suffer the least amount of depreciation in a major recession.

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