Question 1

Bonds issued by political subdivisions of the U.S. government that are not obligations of the U.S. Treasury are called:

Accepted Answer

A)  federal bonds. 
B)  agency bonds. 
C)  Treasury bonds. 
D)  municipal bonds. 
E)  trust bonds. 
A)  federal bonds. 
B)  agency bonds. 
C)  Treasury bonds. 
D)  municipal bonds. 
E)  trust bonds. B

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
A cyclical stock's price would tend to move in the [ same  | opposite ] direction as the entire market.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 5

The _____ of a stock reflects investors' confidence.

Accepted Answer

A)  par value 
B)  book value 
C)  earnings per share (EPS) 
D)  price/earnings (P/
E)  ratio 
E)  dividend yield 
A)  par value 
B)  book value 
C)  earnings per share (EPS) 
D)  price/earnings (P/
E)  ratio 
E)  dividend yield

Question 6

Capital gains are paid at specified times (e.g., quarterly or semiannually).

Accepted Answer

A) True 
 B)False

Question 7

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
When the prevailing market price of a share of common stock is divided by the annual earnings per share (EPS), the result is the [ return on equity (ROE) | price/earnings (P/E) ratio ].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 8

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 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
Tax on capital gains is paid [ as the stock appreciates | in the year the stock is sold ].

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 10

Only the federal government issues zero coupon bonds.

Accepted Answer

A) True 
 B)False

Question 11

U.S. bonds typically pay interest monthly.

Accepted Answer

A) True 
 B)False

Question 12

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
The possibility that a corporation might fail is [ economic | business ] risk.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 13

The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its:

Accepted Answer

A)  par value. 
B)  clean price. 
C)  negotiated price. 
D)  dirty price. 
E)  discount price. 
A)  par value. 
B)  clean price. 
C)  negotiated price. 
D)  dirty price. 
E)  discount price.

Question 14

The main advantages of common stock ownership are:

Accepted Answer

A)  potential substantial returns and high liquidity. 
B)  potential substantial returns and voting rights. 
C)  a high interest payment and availability of market information. 
D)  no direct management and guaranteed dividends. 
E)  low risk and guaranteed dividends. 
A)  potential substantial returns and high liquidity. 
B)  potential substantial returns and voting rights. 
C)  a high interest payment and availability of market information. 
D)  no direct management and guaranteed dividends. 
E)  low risk and guaranteed dividends.

Question 15

Market risk considers the possibility that a firm may fail.

Accepted Answer

A) True 
 B)False

Question 16

A Puppy Pet Services $1,000 bond has a 7.5% coupon rate, matures in 2020, and is currently quoted at $820. What is the current yield? (Round the answer to two decimal places.)

Accepted Answer

A)  6.15% 
B)  7.50 % 
C)  9.15 % 
D)  10.27 % 
E)  11.43 % 
A)  6.15% 
B)  7.50 % 
C)  9.15 % 
D)  10.27 % 
E)  11.43 %

Question 17

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 18

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. 
ACE, Inc.'s stock has a market capitalization of $500 million. It would be classified as a [ small-cap | mid-cap ] stock.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 19

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%, what would the fully taxable equivalent yield be? (Round the answer to two decimal places.)

Accepted Answer

A)  6.90% 
B)  8.26% 
C)  9.58% 
D)  12.11% 
E)  14.63% 
A)  6.90% 
B)  8.26% 
C)  9.58% 
D)  12.11% 
E)  14.63%

Question 20

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

Accepted Answer

A) True 
 B)False

Bonds issued by political subdivisions of the U.S. government that are not obligations of the U.S. Treasury are called:

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

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

The _____ of a stock reflects investors' confidence.

Capital gains are paid at specified times (e.g., quarterly or semiannually).

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

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Tax on capital gains is paid [ as the stock appreciates | in the year the stock is sold ].

Only the federal government issues zero coupon bonds.

U.S. bonds typically pay interest monthly.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The possibility that a corporation might fail is [ economic | business ] risk.

The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its:

The main advantages of common stock ownership are:

Market risk considers the possibility that a firm may fail.

A Puppy Pet Services $1,000 bond has a 7.5% coupon rate, matures in 2020, and is currently quoted at $820. What is the current yield? (Round the answer to two decimal places.)

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

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%, what would the fully taxable equivalent yield be? (Round the answer to two decimal places.)

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

Understanding the Financial Planning Process

Developing Your Financial Statements and Plans

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 and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 12: Investing in Stocks and Bonds

Bonds issued by political subdivisions of the U.S. government that are not obligations of the U.S. Treasury are called:

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

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

The _____ of a stock reflects investors' confidence.

Capital gains are paid at specified times (e.g., quarterly or semiannually).

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

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Tax on capital gains is paid [ as the stock appreciates | in the year the stock is sold ].

Only the federal government issues zero coupon bonds.

U.S. bonds typically pay interest monthly.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. The possibility that a corporation might fail is [ economic | business ] risk.

The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its:

The main advantages of common stock ownership are:

Market risk considers the possibility that a firm may fail.

A Puppy Pet Services $1,000 bond has a 7.5% coupon rate, matures in 2020, and is currently quoted at $820. What is the current yield? (Round the answer to two decimal places.)

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

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%, what would the fully taxable equivalent yield be? (Round the answer to two decimal places.)

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

Understanding the Financial Planning Process

Developing Your Financial Statements and Plans

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 and Real Estate

Planning for Retirement

Preserving Your Estate

Filters