Question 1

The higher the tax bracket you are in, the more attractive the purchase of municipal bonds becomes.

Accepted Answer

A) True 
 B)False  True

Question 2

Suppose the earnings per share of a stock is $2 and the current price\earnings (P\E)ratio is 10. What is the current price of the stock?

Accepted Answer

A) $5 
B) $8 
C) $20 
D) $40 
E) $35 
A) $5 
B) $8 
C) $20 
D) $40 
E) $35 C

Question 3

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

Accepted Answer

A) True 
 B)False  True

Question 4

The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own:

Accepted Answer

A) 200 shares. 
B) 205 shares. 
C) 210 shares. 
D) 420 shares. 
E) 410 shares. 
A) 200 shares. 
B) 205 shares. 
C) 210 shares. 
D) 420 shares. 
E) 410 shares.

Question 5

An example of event risk is:

Accepted Answer

A) inflation. 
B) a corporate takeover. 
C) a newspaper article about the economy. 
D) changing seasons. 
E) capital growth. 
A) inflation. 
B) a corporate takeover. 
C) a newspaper article about the economy. 
D) changing seasons. 
E) capital growth.

Question 6

A stock generally issued by companies expected to provide an uninterrupted stream of dividends and good, long-term growth prospects is called a(n):

Accepted Answer

A) blue-chip stock. 
B) growth stock. 
C) income stock. 
D) defensive stock. 
E) cyclical stock. 
A) blue-chip stock. 
B) growth stock. 
C) income stock. 
D) defensive stock. 
E) cyclical stock.

Question 7

A bond selling below par value is selling at:

Accepted Answer

A) a discount. 
B) its coupon value. 
C) a premium. 
D) its maturity value. 
E) the highest effective yield. 
A) a discount. 
B) its coupon value. 
C) a premium. 
D) its maturity value. 
E) the highest effective yield.

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

The commonly cited price for a bond in the financial press and on the Internet is usually its _____ bond price.

Accepted Answer

A) clean 
B) dirty 
C) premium 
D) discount 
E) accrued 
A) clean 
B) dirty 
C) premium 
D) discount 
E) accrued

Question 10

The value of a stock at any time depends on its expected stream of future earnings.

Accepted Answer

A) True 
 B)False

Question 11

What is the effect of an increase in the current price of an investment?

Accepted Answer

A) The approximate expected yield will increase. 
B) The approximate expected yield will decrease. 
C) The approximate expected yield will remain the same. 
D) The average annual current income will increase. 
E) The average annual current income will decrease. 
A) The approximate expected yield will increase. 
B) The approximate expected yield will decrease. 
C) The approximate expected yield will remain the same. 
D) The average annual current income will increase. 
E) The average annual current income will decrease.

Question 12

Dividend reinvestment plans should be avoided because of their relatively high cost.

Accepted Answer

A) True 
 B)False

Question 13

Corporate ownership by an investor is evidenced by:

Accepted Answer

A) coupon payments. 
B) common stocks. 
C) corporate bonds. 
D) the receipt of capital gains. 
E) property rights. 
A) coupon payments. 
B) common stocks. 
C) corporate bonds. 
D) the receipt of capital gains. 
E) property rights.

Question 14

When the market interest rate decreases, the bond:

Accepted Answer

A) price increases. 
B) maturity period decreases. 
C) coupon rate decreases. 
D) current yield increases. 
E) yield to maturity increases. 
A) price increases. 
B) maturity period decreases. 
C) coupon rate decreases. 
D) current yield increases. 
E) yield to maturity increases.

Question 15

An investment that earns interest on interest is said to be earning a:

Accepted Answer

A) discounted rate of return. 
B) fully compounded rate of return. 
C) consolidated rate of return. 
D) risk-free rate of return. 
E) tax-free rate of return. 
A) discounted rate of return. 
B) fully compounded rate of return. 
C) consolidated rate of return. 
D) risk-free rate of return. 
E) tax-free rate of return.

Question 16

The net income of Sunrise Corporation is $5 million, and shareholders' equity is $50 million. The return on equity is:

Accepted Answer

A) 5%. 
B) 10%. 
C) 20%. 
D) 15%. 
E) 25%. 
A) 5%. 
B) 10%. 
C) 20%. 
D) 15%. 
E) 25%.

Question 17

When a bond is sold between coupon payment dates, the buyer pays the seller for the _____, which is the prorated share of the upcoming coupon payment.

Accepted Answer

A) accrued interest 
B) prepaid interest 
C) bond premium 
D) bond discount 
E) discount 
A) accrued interest 
B) prepaid interest 
C) bond premium 
D) bond discount 
E) discount

Question 18

A lower expected return means a higher risk will have to be accepted.

Accepted Answer

A) True 
 B)False

Question 19

The returns you expect from securities are income and growth.

Accepted Answer

A) True 
 B)False

Question 20

_____ risk results from the behavior of investors buying and selling securities that lead to swings in prices.

Accepted Answer

A) Business 
B) Financial 
C) Market 
D) Purchasing power 
E) Interest rate 
A) Business 
B) Financial 
C) Market 
D) Purchasing power 
E) Interest rate

The higher the tax bracket you are in, the more attractive the purchase of municipal bonds becomes.

Suppose the earnings per share of a stock is $2 and the current price\earnings (P\E)ratio is 10. What is the current price of the stock?

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own:

An example of event risk is:

A stock generally issued by companies expected to provide an uninterrupted stream of dividends and good, long-term growth prospects is called a(n):

A bond selling below par value is selling at:

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

The commonly cited price for a bond in the financial press and on the Internet is usually its _____ bond price.

The value of a stock at any time depends on its expected stream of future earnings.

What is the effect of an increase in the current price of an investment?

Dividend reinvestment plans should be avoided because of their relatively high cost.

Corporate ownership by an investor is evidenced by:

When the market interest rate decreases, the bond:

An investment that earns interest on interest is said to be earning a:

The net income of Sunrise Corporation is $5 million, and shareholders' equity is $50 million. The return on equity is:

When a bond is sold between coupon payment dates, the buyer pays the seller for the _____, which is the prorated share of the upcoming coupon payment.

A lower expected return means a higher risk will have to be accepted.

The returns you expect from securities are income and growth.

_____ risk results from the behavior of investors buying and selling securities that lead to swings in prices.

Understanding the Financial Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Mutual Funds, Etfs, and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 12: Investing in Stocks and Bonds

The higher the tax bracket you are in, the more attractive the purchase of municipal bonds becomes.

Suppose the earnings per share of a stock is $2 and the current price\earnings (P\E)ratio is 10. What is the current price of the stock?

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own:

An example of event risk is:

A stock generally issued by companies expected to provide an uninterrupted stream of dividends and good, long-term growth prospects is called a(n):

A bond selling below par value is selling at:

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

The commonly cited price for a bond in the financial press and on the Internet is usually its _____ bond price.

The value of a stock at any time depends on its expected stream of future earnings.

What is the effect of an increase in the current price of an investment?

Dividend reinvestment plans should be avoided because of their relatively high cost.

Corporate ownership by an investor is evidenced by:

When the market interest rate decreases, the bond:

An investment that earns interest on interest is said to be earning a:

The net income of Sunrise Corporation is $5 million, and shareholders' equity is $50 million. The return on equity is:

When a bond is sold between coupon payment dates, the buyer pays the seller for the _____, which is the prorated share of the upcoming coupon payment.

A lower expected return means a higher risk will have to be accepted.

The returns you expect from securities are income and growth.

_____ risk results from the behavior of investors buying and selling securities that lead to swings in prices.

Understanding the Financial Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Mutual Funds, Etfs, and Real Estate

Planning for Retirement

Preserving Your Estate

Filters