Question 1

Our study of efficient markets tells us all of the following about investing except

Accepted Answer

A)  Do not try to time the market - stay with your plan. 
B)  Long-term investing is your best bet, not systems. 
C)  Go with the best investment advisor money can buy. 
D)  Focus on effective asset allocation. 
E)  Diversify and seek help if you don't feel comfortable. 
A)  Do not try to time the market - stay with your plan. 
B)  Long-term investing is your best bet, not systems. 
C)  Go with the best investment advisor money can buy. 
D)  Focus on effective asset allocation. 
E)  Diversify and seek help if you don't feel comfortable.

Question 2

Historically, U.S. government securities have been considered the safest, lowest-risk investment available.

Accepted Answer

A) True 
 B)False

Question 3

An option gives you the right to buy or sell the underlying asset at a set price on or before the option's maturity date.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements regarding risk in investing is most correct?

Accepted Answer

A)  Avoiding risk is the best strategy to accumulate wealth. 
B)  It is most important to avoid risk during the early years, up to age 54. 
C)  It is hard to achieve a positive real return by avoiding risk all together. 
D)  Trying to avoid risk is an exercise in futility. 
A)  Avoiding risk is the best strategy to accumulate wealth. 
B)  It is most important to avoid risk during the early years, up to age 54. 
C)  It is hard to achieve a positive real return by avoiding risk all together. 
D)  Trying to avoid risk is an exercise in futility.

Question 5

When you purchase an asset that generates a return, it is generally considered to be ________.

Accepted Answer

A)  an investment 
B)  speculation 
C)  a windfall 
D)  an expected returner 
E)  none of the above 
A)  an investment 
B)  speculation 
C)  a windfall 
D)  an expected returner 
E)  none of the above

Question 6

When it comes to tax advantages, capital gains and dividend income are taxed at a lower rate than ordinary income.

Accepted Answer

A) True 
 B)False

Question 7

The ________ is the stated amount on the face of a bond, which the firm is to repay at the maturity date.

Accepted Answer

A)  historical value 
B)  debt price 
C)  par value 
D)  relevant value 
E)  none of the above 
A)  historical value 
B)  debt price 
C)  par value 
D)  relevant value 
E)  none of the above

Question 8

The higher your marginal tax bracket, the less attractive tax-free investments become.

Accepted Answer

A) True 
 B)False

Question 9

Jennifer has money invested in stocks. She earns a return on her investment, which is a portion of the company's profits, called ________.

Accepted Answer

A)  interest 
B)  a return 
C)  dividends 
D)  growth 
E)  retained earnings 
A)  interest 
B)  a return 
C)  dividends 
D)  growth 
E)  retained earnings

Question 10

Suppose that you purchased a machine several years ago for your company. You recently sold the machine for more than you paid. This is an example of a ________.

Accepted Answer

A)  capital carry-forward 
B)  non-taxable gain 
C)  capital gain 
D)  windfall 
E)  none of the above 
A)  capital carry-forward 
B)  non-taxable gain 
C)  capital gain 
D)  windfall 
E)  none of the above

Question 11

Alice just inherited an antique wood burning stove. While she appreciates the sentimental value of the stove she is concerned that an investment such as this might not be able to be converted into cash quickly at a fair market price. Alice is worried about ________ on this as an investment.

Accepted Answer

A)  liquidity risk 
B)  cash conversion 
C)  maturity risk 
D)  default risk 
E)  none of the above 
A)  liquidity risk 
B)  cash conversion 
C)  maturity risk 
D)  default risk 
E)  none of the above

Question 12

An option gives its owner the right to buy or sell an asset. This asset is generally ________.

Accepted Answer

A)  preferred stock 
B)  mutual funds 
C)  corporate bonds 
D)  common stock 
E)  none of the above are correct 
A)  preferred stock 
B)  mutual funds 
C)  corporate bonds 
D)  common stock 
E)  none of the above are correct

Question 13

Liquidity risk is a very important part of the time dimension of investing.

Accepted Answer

A) True 
 B)False

Question 14

The ________ rate is the interest to be paid annually on a bond as a percentage of its par value.

Accepted Answer

A)  base 
B)  coupon interest 
C)  face interest 
D)  compound interest 
E)  none of the above 
A)  base 
B)  coupon interest 
C)  face interest 
D)  compound interest 
E)  none of the above

Question 15

Unsystematic risk cannot be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 16

Recently an oil rig in the Gulf of Texas blew up causing the value of your stock in the company who owns the oil rig to fall. What type of risk does this represent?

Accepted Answer

A)  diversifiable risk 
B)  systematic risk 
C)  political and regulatory risk 
D)  Both B and C 
A)  diversifiable risk 
B)  systematic risk 
C)  political and regulatory risk 
D)  Both B and C

Question 17

A security whose value is based solely on the value of other assets is called a ________ security.

Accepted Answer

A)  capital option 
B)  hedging 
C)  derivative 
D)  alternative asset 
E)  none of the above 
A)  capital option 
B)  hedging 
C)  derivative 
D)  alternative asset 
E)  none of the above

Question 18

Lawrence Wright is slow in math. He has before him the equation of (ending value minus beginning value) and income return totalled, then divided by beginning value. This is used to find the

Accepted Answer

A)  rate of inflation. 
B)  capital gain. 
C)  capital loss 
D)  rate of return. 
E)  serialized rate of return. 
A)  rate of inflation. 
B)  capital gain. 
C)  capital loss 
D)  rate of return. 
E)  serialized rate of return.

Question 19

The more efficient the market, the faster prices react to new information.

Accepted Answer

A) True 
 B)False

Question 20

Stocks represent a legal obligation for the issuing company to pay dividends, whether the company has made a profit or not.

Accepted Answer

A) True 
 B)False

Our study of efficient markets tells us all of the following about investing except

Historically, U.S. government securities have been considered the safest, lowest-risk investment available.

An option gives you the right to buy or sell the underlying asset at a set price on or before the option's maturity date.

Which of the following statements regarding risk in investing is most correct?

When you purchase an asset that generates a return, it is generally considered to be ________.

When it comes to tax advantages, capital gains and dividend income are taxed at a lower rate than ordinary income.

The ________ is the stated amount on the face of a bond, which the firm is to repay at the maturity date.

The higher your marginal tax bracket, the less attractive tax-free investments become.

Jennifer has money invested in stocks. She earns a return on her investment, which is a portion of the company's profits, called ________.

Suppose that you purchased a machine several years ago for your company. You recently sold the machine for more than you paid. This is an example of a ________.

Alice just inherited an antique wood burning stove. While she appreciates the sentimental value of the stove she is concerned that an investment such as this might not be able to be converted into cash quickly at a fair market price. Alice is worried about ________ on this as an investment.

An option gives its owner the right to buy or sell an asset. This asset is generally ________.

Liquidity risk is a very important part of the time dimension of investing.

The ________ rate is the interest to be paid annually on a bond as a percentage of its par value.

Unsystematic risk cannot be eliminated through diversification.

Recently an oil rig in the Gulf of Texas blew up causing the value of your stock in the company who owns the oil rig to fall. What type of risk does this represent?

A security whose value is based solely on the value of other assets is called a ________ security.

Lawrence Wright is slow in math. He has before him the equation of (ending value minus beginning value) and income return totalled, then divided by beginning value. This is used to find the

The more efficient the market, the faster prices react to new information.

Stocks represent a legal obligation for the issuing company to pay dividends, whether the company has made a profit or not.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters

Exam 11: Investment Basics

Our study of efficient markets tells us all of the following about investing except

Historically, U.S. government securities have been considered the safest, lowest-risk investment available.

An option gives you the right to buy or sell the underlying asset at a set price on or before the option's maturity date.

Which of the following statements regarding risk in investing is most correct?

When you purchase an asset that generates a return, it is generally considered to be ________.

When it comes to tax advantages, capital gains and dividend income are taxed at a lower rate than ordinary income.

The ________ is the stated amount on the face of a bond, which the firm is to repay at the maturity date.

The higher your marginal tax bracket, the less attractive tax-free investments become.

Jennifer has money invested in stocks. She earns a return on her investment, which is a portion of the company's profits, called ________.

Suppose that you purchased a machine several years ago for your company. You recently sold the machine for more than you paid. This is an example of a ________.

Alice just inherited an antique wood burning stove. While she appreciates the sentimental value of the stove she is concerned that an investment such as this might not be able to be converted into cash quickly at a fair market price. Alice is worried about ________ on this as an investment.

An option gives its owner the right to buy or sell an asset. This asset is generally ________.

Liquidity risk is a very important part of the time dimension of investing.

The ________ rate is the interest to be paid annually on a bond as a percentage of its par value.

Unsystematic risk cannot be eliminated through diversification.

Recently an oil rig in the Gulf of Texas blew up causing the value of your stock in the company who owns the oil rig to fall. What type of risk does this represent?

A security whose value is based solely on the value of other assets is called a ________ security.

Lawrence Wright is slow in math. He has before him the equation of (ending value minus beginning value) and income return totalled, then divided by beginning value. This is used to find the

The more efficient the market, the faster prices react to new information.

Stocks represent a legal obligation for the issuing company to pay dividends, whether the company has made a profit or not.

The Financial Planning Process

Measuring Your Financial Health and Making a Plan

Understanding and Appreciating the Time Value of Money

Tax Planning and Strategies

Cash or Liquid Asset Management

Using Credit Cards: The Role of Open Credit

Using Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

Securities Markets

Investing in Stocks

Investing in Bonds and Other Alternatives

Mutual Funds: An Easy Way to Diversify

Retirement Planning

Estate Planning: Saving Your Heirs Money and Headaches

Financial Life Events Fitting the Pieces Together

Filters