Exam 14: Investing Fundamentals

Use the following two columns of items to answer the matching questions below: -day trader A)first offering of a firm's stock to the public B)facilities that allow investors to purchase or sell existing stocks C)investors owning this type of stock have priority over common stockholders in receiving dividends D)market where existing securities are sold E)individual investors who buy and sell stocks within a day F)financial instruments that represent partial ownership of a firm G)debt instruments issued by the government or corporations to borrow money from investors H)professionals responsible for clients' funds

What would you pay for a stock whose price you estimate will be $50 in 10 years and you wish to earn a return on the investment of 9% per year? Ignore brokerage commissions and tax implications and assume the stock pays no dividends during the holding period.

Growth stocks tend to pay ________ dividends and have ________ appreciation of stock prices.

Income stocks tend to pay ________ dividends and have ________ appreciation of stock prices.

Assuming a tax rate on ordinary income of 25% and a long-term capital gain rate of 10%, how much would you pay in taxes if you sold stock "A" for a $200 capital gain after holding it for 5 months, stock "B" for a $300 capital gain after holding it for 8 months, and stock "C" for a $500 capital gain after holding it for 14 months?

If you have $1,000 to invest, but will need the money in one month to pay bills, you should

Jane has $3,200 she wants to invest in stocks. She has found an investment that she believes will earn a 9% annual return. What will be the value of Jane's investment in 20 years if she is correct?

Stocks that provide investors with steady income in the form of large dividends are classified as ________.

What return on investment would you earn if you bought a stock on 1/1/16 for $100, received a 1% per quarter dividend and sold the stock on 1/2/2017 for $107?

The higher the dividend paid by a firm, the lower its potential stock price appreciation.

Institutional investors are professionals employed by a financial institution, who invest their own money earned from their jobs.

To earn the highest possible return in the stock market, you will need to

To measure an investment's risk, you may use all of the following, except

Name three applications of present and future value concepts to stocks.

One of the attractive features of mutual funds is that they offer small investors a diversified portfolio and professional management.

Examples of common investment mistakes covered in the text include all of the following, except

If investors were risk averse, they would want to

Which of the following is not true regarding mutual funds?

Corporate bonds

________ investors are professionals employed by a financial institution and are responsible for managing money.