Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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

Question 3

Investors would prefer a stock with steadily increasing earnings per share (EPS) and return on equity (ROE).

Accepted Answer

A) True 
 B)False

Question 4

Research shows that most investors are better off investing steadily than trying to time the market.

Accepted Answer

A) True 
 B)False

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

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

Which of the following types of bonds is unsecured?

Accepted Answer

A)  Mortgage bonds 
B)  Equipment trust certificates 
C)  Debentures 
D)  Agency bonds 
E)  Treasury bonds 
A)  Mortgage bonds 
B)  Equipment trust certificates 
C)  Debentures 
D)  Agency bonds 
E)  Treasury bonds

Question 9

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 10

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 11

The two basic sources of income from an investment are current income and capital gains.

Accepted Answer

A) True 
 B)False

Question 12

Treasury notes are issued with:

Accepted Answer

A)  maturities of 2, 3, 5, and 10 years. 
B)  maturities of 20 and 30 years. 
C)  maturities of 5, 10, and 20 years. 
D)  a series of various maturity dates. 
E)  no maturity dates. 
A)  maturities of 2, 3, 5, and 10 years. 
B)  maturities of 20 and 30 years. 
C)  maturities of 5, 10, and 20 years. 
D)  a series of various maturity dates. 
E)  no maturity dates.

Question 13

An investor receives a return from an investment due to:

Accepted Answer

A)  recurring deposits. 
B)  capital gains on the sale of an investment. 
C)  asset allocation among different asset classes. 
D)  rebalancing by buying more equities. 
E)  diversification among or within asset classes. 
A)  recurring deposits. 
B)  capital gains on the sale of an investment. 
C)  asset allocation among different asset classes. 
D)  rebalancing by buying more equities. 
E)  diversification among or within asset classes.

Question 14

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

Question 15

Low price/earnings (P/E) ratios indicate high investor confidence.

Accepted Answer

A) True 
 B)False

Question 16

American Depositary Receipts (ADRs) are denominated in the currencies of the foreign countries where the corporations issuing these ADRs are registered.

Accepted Answer

A) True 
 B)False

Question 17

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. 
Convertible bonds usually trade at [ less | more ] than their conversion value.

Accepted Answer

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

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. 
A potential high return on an investment will signal a [ high | low ] exposure to risk.

Accepted Answer

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

Question 19

A firm's overall profitability is often measured by:

Accepted Answer

A)  book value. 
B)  return on equity (RO
E) . 
C)  market value. 
D)  net profit margin. 
E)  beta. 
A)  book value. 
B)  return on equity (RO
E) . 
C)  market value. 
D)  net profit margin. 
E)  beta.

Question 20

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

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

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

Investors would prefer a stock with steadily increasing earnings per share (EPS) and return on equity (ROE).

Research shows that most investors are better off investing steadily than trying to time the market.

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

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

A bond selling below par value is selling at:

Which of the following types of bonds is unsecured?

A stock's dividend yield is calculated as the:

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

The two basic sources of income from an investment are current income and capital gains.

Treasury notes are issued with:

An investor receives a return from an investment due to:

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

Low price/earnings (P/E) ratios indicate high investor confidence.

American Depositary Receipts (ADRs) are denominated in the currencies of the foreign countries where the corporations issuing these ADRs are registered.

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. Convertible bonds usually trade at [ less | more ] than their conversion value.

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 potential high return on an investment will signal a [ high | low ] exposure to risk.

A firm's overall profitability is often measured by:

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

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

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

Investors would prefer a stock with steadily increasing earnings per share (EPS) and return on equity (ROE).

Research shows that most investors are better off investing steadily than trying to time the market.

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

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

A bond selling below par value is selling at:

Which of the following types of bonds is unsecured?

A stock's dividend yield is calculated as the:

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

The two basic sources of income from an investment are current income and capital gains.

Treasury notes are issued with:

An investor receives a return from an investment due to:

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

Low price/earnings (P/E) ratios indicate high investor confidence.

American Depositary Receipts (ADRs) are denominated in the currencies of the foreign countries where the corporations issuing these ADRs are registered.

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. Convertible bonds usually trade at [ less | more ] than their conversion value.

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 potential high return on an investment will signal a [ high | low ] exposure to risk.

A firm's overall profitability is often measured by:

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