Question 1

_____  dividends are the most common form of dividends.

Accepted Answer

A) Cash 
B) Stock 
C) Convertible 
D) Reinvestment 
E) Discount 
A) Cash 
B) Stock 
C) Convertible 
D) Reinvestment 
E) Discount

Question 2

An investment is acceptable if the expected rate of return is greater than the required rate of return.

Accepted Answer

A) True 
 B)False

Question 3

Damien plans to buy a share at $120 and hold it for 5 years. During this period, he would receive average annual dividends of $4 a share. He expects to receive $145 at the end of the 5-year period when he sells the share. What are the keystrokes used to calculate the rate of return on the investment?

Accepted Answer

A) N = 5, PV = -120, PMT = 4, FV = 145 
B) N = 5, PV = 120, PMT = 4, FV = -145 
C) N = 5, PV = -145, PMT = -4, FV = 120 
D) N = 4, PV = -120, PMT = 5, FV = 145 
E) N = 4, PV = 145, PMT = 5, FV = -120 
A) N = 5, PV = -120, PMT = 4, FV = 145 
B) N = 5, PV = 120, PMT = 4, FV = -145 
C) N = 5, PV = -145, PMT = -4, FV = 120 
D) N = 4, PV = -120, PMT = 5, FV = 145 
E) N = 4, PV = 145, PMT = 5, FV = -120

Question 4

To most stockholders, the main advantages of common stock investments are:

Accepted Answer

A) attractive returns and active trading. 
B) guaranteed returns and voting rights. 
C) a high interest payment and active trading. 
D) high risk and guaranteed returns. 
E) low risk and guaranteed returns. 
A) attractive returns and active trading. 
B) guaranteed returns and voting rights. 
C) a high interest payment and active trading. 
D) high risk and guaranteed returns. 
E) low risk and guaranteed returns.

Question 5

Compound interest is a very important consideration when evaluating the return on an investment you plan to hold for a long time.

Accepted Answer

A) True 
 B)False

Question 6

Cash dividends on common stock are most often paid:

Accepted Answer

A) weekly. 
B) monthly. 
C) quarterly. 
D) semiannually. 
E) annually. 
A) weekly. 
B) monthly. 
C) quarterly. 
D) semiannually. 
E) annually.

Question 7

In the stock market, the market cap of a large-cap stock is more than:

Accepted Answer

A) $10 billion. 
B) $20 billion. 
C) $1 billion. 
D) $50 million. 
E) $5 million. 
A) $10 billion. 
B) $20 billion. 
C) $1 billion. 
D) $50 million. 
E) $5 million.

Question 8

The easiest way to invest in foreign markets is through:

Accepted Answer

A) the stocks purchased directly from an overseas broker. 
B) the stocks purchased directly from a regular broker. 
C) the stocks purchased directly over the Internet. 
D) international mutual funds. 
E) the purchase of Eurobonds. 
A) the stocks purchased directly from an overseas broker. 
B) the stocks purchased directly from a regular broker. 
C) the stocks purchased directly over the Internet. 
D) international mutual funds. 
E) the purchase of Eurobonds.

Question 9

The business risk faced by an investor when investing in a company is related to:

Accepted Answer

A) changes in the economy. 
B) investor behavior in the market. 
C) the book value of a firm's assets. 
D) the firm's ability to meet operating expenses in a timely manner. 
E) security price fluctuations. 
A) changes in the economy. 
B) investor behavior in the market. 
C) the book value of a firm's assets. 
D) the firm's ability to meet operating expenses in a timely manner. 
E) security price fluctuations.

Question 10

The approximate yield to maturity of a bond is greater than the stated rate of interest when the:

Accepted Answer

A) bond is purchased at face value. 
B) bond is purchased at a discount. 
C) bond is purchased at a premium. 
D) market rates of interest decline. 
E) market rates of interest are constant. 
A) bond is purchased at face value. 
B) bond is purchased at a discount. 
C) bond is purchased at a premium. 
D) market rates of interest decline. 
E) market rates of interest are constant.

Question 11

Which of the following types of risk has the most effect on owners of fixed income securities?

Accepted Answer

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

Question 12

Market risk considers the possibility that a firm may fail.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following investments has the highest liquidity risk?

Accepted Answer

A) Common stock 
B) Corporate bond 
C) Treasury bond 
D) Land 
E) Mutual fund share 
A) Common stock 
B) Corporate bond 
C) Treasury bond 
D) Land 
E) Mutual fund share

Question 14

Total investment return can be exactly calculated using the approximate expected yield method.

Accepted Answer

A) True 
 B)False

Question 15

Return on equity is calculated by:

Accepted Answer

A) subtracting liabilities from assets. 
B) adding the book value and the market price of a stock. 
C) dividing net income by shareholders' equity. 
D) multiplying assets by a selected number. 
E) deducting taxes from dividends. 
A) subtracting liabilities from assets. 
B) adding the book value and the market price of a stock. 
C) dividing net income by shareholders' equity. 
D) multiplying assets by a selected number. 
E) deducting taxes from dividends.

Question 16

Stocks whose prices tend to increase when the economy is in an expansionary stage and decline during a contractionary stage are called:

Accepted Answer

A) cyclical stocks. 
B) defensive stocks. 
C) speculative stocks. 
D) income stocks. 
E) tech stocks. 
A) cyclical stocks. 
B) defensive stocks. 
C) speculative stocks. 
D) income stocks. 
E) tech stocks.

Question 17

A stock's dividend yield is calculated as the:

Accepted Answer

A) annual dividend received per share divided by the book value per share of stock. 
B) book value per share of stock divided by the annual dividend received per share. 
C) annual dividend received per share divided by the market price per share of stock. 
D) market price per share of stock divided by the annual dividend received per share. 
E) earnings remaining after paying preferred dividends divided by the number of common shares outstanding. 
A) annual dividend received per share divided by the book value per share of stock. 
B) book value per share of stock divided by the annual dividend received per share. 
C) annual dividend received per share divided by the market price per share of stock. 
D) market price per share of stock divided by the annual dividend received per share. 
E) earnings remaining after paying preferred dividends divided by the number of common shares outstanding.

Question 18

John Smith is in the 28% tax bracket. If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9%, the fully taxable equivalent yield would be:

Accepted Answer

A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%. 
A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%.

Question 19

The return on a _____ is an appropriate measure of the risk-free rate of return.

Accepted Answer

A) long-term Treasury note 
B) certificate of deposit 
C) 90-day Treasury bill 
D) long-term corporate bond 
E) common stock 
A) long-term Treasury note 
B) certificate of deposit 
C) 90-day Treasury bill 
D) long-term corporate bond 
E) common stock

Question 20

Bonds typically have higher long-term returns when compared to stocks.

Accepted Answer

A) True 
 B)False

_____ dividends are the most common form of dividends.

An investment is acceptable if the expected rate of return is greater than the required rate of return.

To most stockholders, the main advantages of common stock investments are:

Compound interest is a very important consideration when evaluating the return on an investment you plan to hold for a long time.

Cash dividends on common stock are most often paid:

In the stock market, the market cap of a large-cap stock is more than:

The easiest way to invest in foreign markets is through:

The business risk faced by an investor when investing in a company is related to:

The approximate yield to maturity of a bond is greater than the stated rate of interest when the:

Which of the following types of risk has the most effect on owners of fixed income securities?

Market risk considers the possibility that a firm may fail.

Which of the following investments has the highest liquidity risk?

Total investment return can be exactly calculated using the approximate expected yield method.

Return on equity is calculated by:

Stocks whose prices tend to increase when the economy is in an expansionary stage and decline during a contractionary stage are called:

A stock's dividend yield is calculated as the:

John Smith is in the 28% tax bracket. If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9%, the fully taxable equivalent yield would be:

The return on a _____ is an appropriate measure of the risk-free rate of return.

Bonds typically have higher long-term returns when compared to stocks.

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

_____ dividends are the most common form of dividends.

An investment is acceptable if the expected rate of return is greater than the required rate of return.

To most stockholders, the main advantages of common stock investments are:

Compound interest is a very important consideration when evaluating the return on an investment you plan to hold for a long time.

Cash dividends on common stock are most often paid:

In the stock market, the market cap of a large-cap stock is more than:

The easiest way to invest in foreign markets is through:

The business risk faced by an investor when investing in a company is related to:

The approximate yield to maturity of a bond is greater than the stated rate of interest when the:

Which of the following types of risk has the most effect on owners of fixed income securities?

Market risk considers the possibility that a firm may fail.

Which of the following investments has the highest liquidity risk?

Total investment return can be exactly calculated using the approximate expected yield method.

Return on equity is calculated by:

Stocks whose prices tend to increase when the economy is in an expansionary stage and decline during a contractionary stage are called:

A stock's dividend yield is calculated as the:

John Smith is in the 28% tax bracket. If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9%, the fully taxable equivalent yield would be:

The return on a _____ is an appropriate measure of the risk-free rate of return.

Bonds typically have higher long-term returns when compared to stocks.

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