Exam 12: Investing in Stocks and Bonds

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. There is [ a direct | an inverse ] relationship between bond prices and market interest rates.

Bonds rated AA by Standard & Poor's and AaA by Moody's are considered very safe bonds.

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

Companies with a great deal of long-term debt are considered to have high _____ risk.

Which of the following statements about a stock's beta is true?

Bonds can earn income through interest payments and capital gains.

The current net profit of Sigma Inc. is $8 million, the market price of the stock is $65, and sales is $50 million. The net profit margin of Sigma Inc. is:

An example of event risk is:

Which of the following investments has the highest liquidity risk?

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 [ required | expected ] rate of return is the minimum rate of return you should receive in compensation for the amount of risk you must assume.

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

When interest rates decrease, bond:

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 growth stock would be expected to pay a [ high | low ] level of dividends.

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

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

Cash dividends on common stock are most often paid:

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. More speculative investors would prefer stocks with [ higher | lower ] betas.