Question 1

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.

Accepted Answer

A)  unsystematic 
B)  systematic 
C)  volatility 
D)  inflation 
E)  portfolio 
A)  unsystematic 
B)  systematic 
C)  volatility 
D)  inflation 
E)  portfolio

Question 2

Why should investors with a short investment horizon invest less money in common stocks?

Accepted Answer

A)  Because the stock market is very volatile and a catastrophic market event can happen at any time. 
B)  Because the investors won't have enough time available to effectively recover from a loss of their investment principle. 
C)  Because the transaction costs will negatively affect their returns in the short-term. 
D)  All of the above are correct. 
E)  Only A and B are correct. 
A)  Because the stock market is very volatile and a catastrophic market event can happen at any time. 
B)  Because the investors won't have enough time available to effectively recover from a loss of their investment principle. 
C)  Because the transaction costs will negatively affect their returns in the short-term. 
D)  All of the above are correct. 
E)  Only A and B are correct.

Question 3

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

Accepted Answer

A) True 
 B)False

Question 4

Which statement is true regarding overconfidence?

Accepted Answer

A)  Overconfidence leads to trading too often. 
B)  Overconfidence afflicts women more often than men, and it also leads women to trade too often. 
C)  Overconfident investors think they can beat the market. 
D)  Both A and C 
A)  Overconfidence leads to trading too often. 
B)  Overconfidence afflicts women more often than men, and it also leads women to trade too often. 
C)  Overconfident investors think they can beat the market. 
D)  Both A and C

Question 5

Explain the purpose of a brokerage account and the 3 types of brokers.

Accepted Answer

A brokerage account represents the money

Question 6

Because Nancy is extremely risk averse she is less likely to receive a solid rate of return on her investment portfolio than Babby who is more accepting of a risky portfolio.

Accepted Answer

A) True 
 B)False

Question 7

A lending type investment,such as a corporate bond,represents a legal obligation for the issuer to pay its creditors back.

Accepted Answer

A) True 
 B)False

Question 8

Unsystematic risk cannot be eliminated through diversification.

Accepted Answer

A) True 
 B)False

Question 9

Investing in assets such as collectable Barbie Dolls or Beanie Babies are both example of speculating.

Accepted Answer

A) True 
 B)False

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Greg spent the weekend in Las Vegas.He started out with $10,000 and won an additional $5000.Greg was very risky with how he gambled with the $5000 he had won.Greg was exhibiting the ________ effect.

Accepted Answer

A)  disposition 
B)  house money 
C)  loss then risk aversion 
D)  Las Vegas 
E)  none of the above 
A)  disposition 
B)  house money 
C)  loss then risk aversion 
D)  Las Vegas 
E)  none of the above

Question 12

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

Accepted Answer

A) True 
 B)False

Question 13

The Securities Act of 1934 created the SEC to enforce trading laws.

Accepted Answer

A) True 
 B)False

Question 14

With short selling you are hoping for the stock price to fall.

Accepted Answer

A) True 
 B)False

Question 15

The two major organized stock exchanges in the Unites States are the ________ and the ________.

Accepted Answer

A)  AMEX; Chicago 
B)  NYSE; AMEX 
C)  NYSE; Chicago 
D)  NYSE; Pacific 
E)  AMEX; Pacific 
A)  AMEX; Chicago 
B)  NYSE; AMEX 
C)  NYSE; Chicago 
D)  NYSE; Pacific 
E)  AMEX; Pacific

Question 16

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 17

You recently purchased 100 shares of stock at $15 per share.The stock is now worth $20 per share,and it paid a $2 dividend during the time you held it.Your rate of return on this stock is closest to which of the following?

Accepted Answer

A)  -20% 
B)  33% 
C)  35% 
D)  47% 
A)  -20% 
B)  33% 
C)  35% 
D)  47%

Question 18

An investor with a low propensity for risk would avoid investments with high risk premiums.

Accepted Answer

A) True 
 B)False

Question 19

A(n)________ is a legal document that describes a securities issue and is made available to potential investors.

Accepted Answer

A)  disclosure statement 
B)  offering contract 
C)  prospectus 
D)  tombstone 
E)  none of the above 
A)  disclosure statement 
B)  offering contract 
C)  prospectus 
D)  tombstone 
E)  none of the above

Question 20

If the total rate of return is multiplied by 1/N,where N is the number of years for which the investment was held,the result is the

Accepted Answer

A)  serialized rate of return. 
B)  annualized rate of return. 
C)  tax-free rate of return. 
D)  capitalized rate of return. 
A)  serialized rate of return. 
B)  annualized rate of return. 
C)  tax-free rate of return. 
D)  capitalized rate of return.

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.

Why should investors with a short investment horizon invest less money in common stocks?

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

Which statement is true regarding overconfidence?

Explain the purpose of a brokerage account and the 3 types of brokers.

Because Nancy is extremely risk averse she is less likely to receive a solid rate of return on her investment portfolio than Babby who is more accepting of a risky portfolio.

A lending type investment,such as a corporate bond,represents a legal obligation for the issuer to pay its creditors back.

Unsystematic risk cannot be eliminated through diversification.

Investing in assets such as collectable Barbie Dolls or Beanie Babies are both example of speculating.

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

Greg spent the weekend in Las Vegas.He started out with $10,000 and won an additional $5000.Greg was very risky with how he gambled with the $5000 he had won.Greg was exhibiting the ________ effect.

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

The Securities Act of 1934 created the SEC to enforce trading laws.

With short selling you are hoping for the stock price to fall.

The two major organized stock exchanges in the Unites States are the and the .

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

You recently purchased 100 shares of stock at $15 per share.The stock is now worth $20 per share,and it paid a $2 dividend during the time you held it.Your rate of return on this stock is closest to which of the following?

An investor with a low propensity for risk would avoid investments with high risk premiums.

A(n)________ is a legal document that describes a securities issue and is made available to potential investors.

If the total rate of return is multiplied by 1/N,where N is the number of years for which the investment was held,the result is the

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

Student and Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

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

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.

Why should investors with a short investment horizon invest less money in common stocks?

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

Which statement is true regarding overconfidence?

Explain the purpose of a brokerage account and the 3 types of brokers.

Because Nancy is extremely risk averse she is less likely to receive a solid rate of return on her investment portfolio than Babby who is more accepting of a risky portfolio.

A lending type investment,such as a corporate bond,represents a legal obligation for the issuer to pay its creditors back.

Unsystematic risk cannot be eliminated through diversification.

Investing in assets such as collectable Barbie Dolls or Beanie Babies are both example of speculating.

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

Greg spent the weekend in Las Vegas.He started out with $10,000 and won an additional $5000.Greg was very risky with how he gambled with the $5000 he had won.Greg was exhibiting the ________ effect.

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

The Securities Act of 1934 created the SEC to enforce trading laws.

With short selling you are hoping for the stock price to fall.

The two major organized stock exchanges in the Unites States are the ________ and the ________.

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

You recently purchased 100 shares of stock at $15 per share.The stock is now worth $20 per share,and it paid a $2 dividend during the time you held it.Your rate of return on this stock is closest to which of the following?

An investor with a low propensity for risk would avoid investments with high risk premiums.

A(n)________ is a legal document that describes a securities issue and is made available to potential investors.

If the total rate of return is multiplied by 1/N,where N is the number of years for which the investment was held,the result is the

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

Student and Consumer Loans: The Role of Planned Borrowing

The Home and Automobile Decision

Life and Health Insurance

Property and Liability Insurance

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

The two major organized stock exchanges in the Unites States are the and the .