Question 1

A ________ stock comes from a company that makes consumer goods such as food and drugs that have fairly constant demand regardless of the state of the economy.

Accepted Answer

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

Question 2

A(n)________ stock is issued by a young and expanding company and usually doesn't pay a dividend.

Accepted Answer

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

Question 3

What factors can affect a person's risk tolerance, and how can risk tolerance change over time?

Accepted Answer

Personal psychological characteristics o

Question 4

To ensure they'll have the funds to pay back bond holders, companies MOST often put their money into a ________ annually.

Accepted Answer

A) savings account 
B) money market account 
C) managed fund 
D) sinking fund 
A) savings account 
B) money market account 
C) managed fund 
D) sinking fund

Question 5

Defensive stocks usually have a stock price that is greatly affected by the state of the economy.

Accepted Answer

A) True 
 B)False

Question 6

What reward do bond holders get for the risk they take?

Accepted Answer

A) honor of supporting a struggling company 
B) security of government guarantee for their money 
C) option to buy more bonds in the company 
D) ability to receive interest payments on money lent 
A) honor of supporting a struggling company 
B) security of government guarantee for their money 
C) option to buy more bonds in the company 
D) ability to receive interest payments on money lent

Question 7

If the demand for a stock is high and the supply of the stock is low, the price of the stock will ________.

Accepted Answer

A) rise 
B) decline 
C) stay about the same 
D) fluctuate randomly 
A) rise 
B) decline 
C) stay about the same 
D) fluctuate randomly

Question 8

Which of the following bonds has the longest maturity date?

Accepted Answer

A) Treasury bills 
B) Treasury bonds 
C) Treasury notes 
D) All three types of bonds have the same maturity date. 
A) Treasury bills 
B) Treasury bonds 
C) Treasury notes 
D) All three types of bonds have the same maturity date.

Question 9

A 25-year-old with a good job and a high appetite for risk should put a significant portion of her portfolio into ________.

Accepted Answer

A) growth stocks 
B) corporate bonds 
C) the money market 
D) a savings account 
A) growth stocks 
B) corporate bonds 
C) the money market 
D) a savings account

Question 10

Owning ten stocks rather than two illustrates the concept of ________.

Accepted Answer

A) asset allocation 
B) the risk return relationship 
C) diversification 
D) money market funds 
A) asset allocation 
B) the risk return relationship 
C) diversification 
D) money market funds

Question 11

A bond's interest rate is termed its ________.

Accepted Answer

A) rating 
B) face value 
C) par value 
D) coupon 
A) rating 
B) face value 
C) par value 
D) coupon

Question 12

Which of the following bond types is safest?

Accepted Answer

A) convertible bonds 
B) debenture bonds 
C) secured bonds 
D) Treasury bonds 
A) convertible bonds 
B) debenture bonds 
C) secured bonds 
D) Treasury bonds

Question 13

Which of the following Standard & Poor's bond rating categories is most likely to pay the highest interest rate?

Accepted Answer

A) AAA 
B) A 
C) BBB 
D) CCC 
A) AAA 
B) A 
C) BBB 
D) CCC

Question 14

Which of the following is NOT one of four main reasons why mutual funds are popular with investors?

Accepted Answer

A) government guarantees that minimize risk 
B) professional management by experienced people 
C) professional assurance of diversification 
D) ease of buying into it with little money 
A) government guarantees that minimize risk 
B) professional management by experienced people 
C) professional assurance of diversification 
D) ease of buying into it with little money

Question 15

A company issuing bonds is the same as a company getting a loan from an individual bank.

Accepted Answer

A) True 
 B)False

Question 16

An investor who wants a fairly reliable and large dividend would be best served by purchasing a(n)________.

Accepted Answer

A) defensive stock 
B) growth stock 
C) blue chip stock 
D) income stock 
A) defensive stock 
B) growth stock 
C) blue chip stock 
D) income stock

Question 17

What are the names and characteristics of the three major stock indices in the United States?

Accepted Answer

The S&P 500 includes 500 of the largest

Question 18

Discuss the important characteristics of each of the five main types of stocks. Then identify which type of stock would most appeal to someone with a very high risk tolerance. Finally, identify the type of stock most likely to pay the highest dividend on a steady basis.

Accepted Answer

Income stocks pay a good and usually ste

Question 19

When a company issues bonds, financial advisors buy the bonds at face value.

Accepted Answer

A) True 
 B)False

Question 20

A stockholder can receive a substantial amount of money in dividends, yet still wind up with a capital loss on a stock.

Accepted Answer

A) True 
 B)False

Exam 16: Securities and Investments

A ________ stock comes from a company that makes consumer goods such as food and drugs that have fairly constant demand regardless of the state of the economy.

A(n)________ stock is issued by a young and expanding company and usually doesn't pay a dividend.

What factors can affect a person's risk tolerance, and how can risk tolerance change over time?

To ensure they'll have the funds to pay back bond holders, companies MOST often put their money into a ________ annually.

Defensive stocks usually have a stock price that is greatly affected by the state of the economy.

What reward do bond holders get for the risk they take?

If the demand for a stock is high and the supply of the stock is low, the price of the stock will ________.

Which of the following bonds has the longest maturity date?

A 25-year-old with a good job and a high appetite for risk should put a significant portion of her portfolio into ________.

Owning ten stocks rather than two illustrates the concept of ________.

A bond's interest rate is termed its ________.

Which of the following bond types is safest?

Which of the following Standard & Poor's bond rating categories is most likely to pay the highest interest rate?

Which of the following is NOT one of four main reasons why mutual funds are popular with investors?

A company issuing bonds is the same as a company getting a loan from an individual bank.

An investor who wants a fairly reliable and large dividend would be best served by purchasing a(n)________.

What are the names and characteristics of the three major stock indices in the United States?

Discuss the important characteristics of each of the five main types of stocks. Then identify which type of stock would most appeal to someone with a very high risk tolerance. Finally, identify the type of stock most likely to pay the highest dividend on a steady basis.

When a company issues bonds, financial advisors buy the bonds at face value.

A stockholder can receive a substantial amount of money in dividends, yet still wind up with a capital loss on a stock.

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