Question 1

The S&P 500 is a much broader index than the Dow.

Accepted Answer

A) True 
 B)False

Question 2

When the economy slumps, the earnings of cyclical stocks drop; when the economy recovers, so do their earnings.

Accepted Answer

A) True 
 B)False

Question 3

Returns on stocks can come in the form of capital appreciation.

Accepted Answer

A) True 
 B)False

Question 4

While you can't be assured of what you will get when you sell your stock, you will most likely not have difficulty selling it.

Accepted Answer

A) True 
 B)False

Question 5

You are considering the purchase of a stock with a current market price of $50.25 per share. It is expected to pay a dividend of $5.25 next year. Historically the stock has grown at 5%, and based on its risk, you desire to earn a 15% return. Which of the following is true?

Accepted Answer

A)  Buy the stock, since your estimated price is higher than the market price. 
B)  Buy the stock, since your estimated price is lower than the market price. 
C)  Do not buy the stock, since your estimated price is lower than the market price. 
D)  Do not buy the stock, since your estimated price is higher than the market price. 
E)  None of the above are true statements 
A)  Buy the stock, since your estimated price is higher than the market price. 
B)  Buy the stock, since your estimated price is lower than the market price. 
C)  Do not buy the stock, since your estimated price is lower than the market price. 
D)  Do not buy the stock, since your estimated price is higher than the market price. 
E)  None of the above are true statements

Question 6

For an investor who is retired, which category of stocks would be more appropriate for a portion of their portfolio?

Accepted Answer

A)  Blue-chip stocks 
B)  Income stocks 
C)  Growth stocks 
D)  All of the above are correct 
E)  Only A and B are correct 
A)  Blue-chip stocks 
B)  Income stocks 
C)  Growth stocks 
D)  All of the above are correct 
E)  Only A and B are correct

Question 7

For investors with a long time in front of them, market volatility is not of great concern today.

Accepted Answer

A) True 
 B)False

Question 8

Can you explain the risk-return trade-off with common stocks?

Accepted Answer

Stocks have more risk than other investm

Question 9

Because the DJIA weights stocks based on their relative prices, when a high priced stock moves a small amount on the DJIA, it has a(n) ________ impact on the index.

Accepted Answer

A)  limited 
B)  inordinately large 
C)  insignificant 
D)  minute 
A)  limited 
B)  inordinately large 
C)  insignificant 
D)  minute

Question 10

Income stocks are stocks that have a very high capital appreciation potential.

Accepted Answer

A) True 
 B)False

Question 11

When investors talk about movements in the market, they generally refer to the Russell 1000.

Accepted Answer

A) True 
 B)False

Question 12

Explain the purpose and value of the dividend yield ratio.

Accepted Answer

The dividend yield ratio is a tool that

Question 13

Because of her children's immediate financial needs, your aunt Marsha has decided to switch some of her money to high-grade utility company stocks. Her reasoning is that these ________ stocks generally pay relatively high dividends that she will be able to give to her children as they need assistance.

Accepted Answer

A)  growth 
B)  blue-chip 
C)  income 
D)  cyclical 
E)  safe 
A)  growth 
B)  blue-chip 
C)  income 
D)  cyclical 
E)  safe

Question 14

You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct?

Accepted Answer

A)  You could lose up to your $500 investment. 
B)  You could lose more than your $500 investment. 
C)  You cannot lose your investment based on the actions of the company. 
D)  By owning stock in the company, you have also technically violated the law. 
E)  none of the above 
A)  You could lose up to your $500 investment. 
B)  You could lose more than your $500 investment. 
C)  You cannot lose your investment based on the actions of the company. 
D)  By owning stock in the company, you have also technically violated the law. 
E)  none of the above

Question 15

In October, 2008, most of the major stock indices around the world plummeted in value. The most likely cause for these dramatic events were ________?

Accepted Answer

A)  Non-systematic risk 
B)  Variable Betas 
C)  Systematic Risk 
D)  None of the above are correct. 
A)  Non-systematic risk 
B)  Variable Betas 
C)  Systematic Risk 
D)  None of the above are correct.

Question 16

In the event of a corporate bankruptcy, bondholder's claims are paid before shareholders' claims are paid.

Accepted Answer

A) True 
 B)False

Question 17

Louise Rogers knows that several factors affect the price of a share of common stock. The one that says there is an inverse relationship between interest rates and the value of a share of common stock is the ________ factor.

Accepted Answer

A)  risk and stock valuation 
B)  interest rates and stock valuation 
C)  earnings growth and stock valuation 
D)  interest rates and risk valuation 
E)  interest rates and earnings growth valuation 
A)  risk and stock valuation 
B)  interest rates and stock valuation 
C)  earnings growth and stock valuation 
D)  interest rates and risk valuation 
E)  interest rates and earnings growth valuation

Question 18

The ________ date is the date the stock begins trading without dividend, meaning that if you buy it after this date you will not get the dividend for that year.

Accepted Answer

A)  payment date 
B)  declaration date 
C)  ex-dividend date 
D)  reinvestment date 
E)  maturity date 
A)  payment date 
B)  declaration date 
C)  ex-dividend date 
D)  reinvestment date 
E)  maturity date

Question 19

The stocks tracked by the Dow represent over 50% of the market value of the NYSE.

Accepted Answer

A) True 
 B)False

Question 20

You are really keen on stocks. However, you do not like stocks with regard to ________. This means that if a company you have invested in goes bankrupt, the creditors are paid first and you will be out of luck.

Accepted Answer

A)  claim on income 
B)  limited liability 
C)  claims on assets 
D)  voting rights 
E)  claims on dividends 
A)  claim on income 
B)  limited liability 
C)  claims on assets 
D)  voting rights 
E)  claims on dividends

The S&P 500 is a much broader index than the Dow.

When the economy slumps, the earnings of cyclical stocks drop; when the economy recovers, so do their earnings.

Returns on stocks can come in the form of capital appreciation.

While you can't be assured of what you will get when you sell your stock, you will most likely not have difficulty selling it.

You are considering the purchase of a stock with a current market price of $50.25 per share. It is expected to pay a dividend of $5.25 next year. Historically the stock has grown at 5%, and based on its risk, you desire to earn a 15% return. Which of the following is true?

For an investor who is retired, which category of stocks would be more appropriate for a portion of their portfolio?

For investors with a long time in front of them, market volatility is not of great concern today.

Can you explain the risk-return trade-off with common stocks?

Because the DJIA weights stocks based on their relative prices, when a high priced stock moves a small amount on the DJIA, it has a(n) ________ impact on the index.

Income stocks are stocks that have a very high capital appreciation potential.

When investors talk about movements in the market, they generally refer to the Russell 1000.

Explain the purpose and value of the dividend yield ratio.

You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct?

In October, 2008, most of the major stock indices around the world plummeted in value. The most likely cause for these dramatic events were ________?

In the event of a corporate bankruptcy, bondholder's claims are paid before shareholders' claims are paid.

Louise Rogers knows that several factors affect the price of a share of common stock. The one that says there is an inverse relationship between interest rates and the value of a share of common stock is the ________ factor.

The ________ date is the date the stock begins trading without dividend, meaning that if you buy it after this date you will not get the dividend for that year.

The stocks tracked by the Dow represent over 50% of the market value of the NYSE.

You are really keen on stocks. However, you do not like stocks with regard to ________. This means that if a company you have invested in goes bankrupt, the creditors are paid first and you will be out of luck.

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

Investment Basics

Securities Markets

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 13: Investing in Stocks

The S&P 500 is a much broader index than the Dow.

When the economy slumps, the earnings of cyclical stocks drop; when the economy recovers, so do their earnings.

Returns on stocks can come in the form of capital appreciation.

While you can't be assured of what you will get when you sell your stock, you will most likely not have difficulty selling it.

You are considering the purchase of a stock with a current market price of $50.25 per share. It is expected to pay a dividend of $5.25 next year. Historically the stock has grown at 5%, and based on its risk, you desire to earn a 15% return. Which of the following is true?

For an investor who is retired, which category of stocks would be more appropriate for a portion of their portfolio?

For investors with a long time in front of them, market volatility is not of great concern today.

Can you explain the risk-return trade-off with common stocks?

Because the DJIA weights stocks based on their relative prices, when a high priced stock moves a small amount on the DJIA, it has a(n) ________ impact on the index.

Income stocks are stocks that have a very high capital appreciation potential.

When investors talk about movements in the market, they generally refer to the Russell 1000.

Explain the purpose and value of the dividend yield ratio.

You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct?

In October, 2008, most of the major stock indices around the world plummeted in value. The most likely cause for these dramatic events were ________?

In the event of a corporate bankruptcy, bondholder's claims are paid before shareholders' claims are paid.

Louise Rogers knows that several factors affect the price of a share of common stock. The one that says there is an inverse relationship between interest rates and the value of a share of common stock is the ________ factor.

The ________ date is the date the stock begins trading without dividend, meaning that if you buy it after this date you will not get the dividend for that year.

The stocks tracked by the Dow represent over 50% of the market value of the NYSE.

You are really keen on stocks. However, you do not like stocks with regard to ________. This means that if a company you have invested in goes bankrupt, the creditors are paid first and you will be out of luck.

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

Investment Basics

Securities Markets

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