Question 1

Discuss the relationship between growth stocks and income stocks and their P/E ratios.

Accepted Answer

A growth stock is a company that is actively growing and expanding.This growth requires a lot of capital so they seldom pay much in dividends,if any.Instead they plow their earnings back into the growth of the company.A fast growing company leads to the potential for fast growing earnings per share.When the market thinks this growth company has good earnings growth,they bid the share price up accordingly representing higher P/E ratios.
Most income stocks are from companies who are relatively large and mature in their industries.Since they are not in an active growth mode,then they don't need to retain earnings and can instead pay them out to the shareholders in the form of high dividends.Because they are not expected to have a lot of growth in earnings,then the market does not bid up their market price resulting in relatively low P/E ratios.

Question 2

According to your text,there is very little validation in using technical analysis as an investing tool.

Accepted Answer

A) True 
 B)False  True

Question 3

Your mother-in-law's stockbroker focuses on supply and demand,and uses charts and computer programs to identify and make buy-sell recommendations.She is using the ________ method.

Accepted Answer

A)  descriptive analysis 
B)  visual hedging 
C)  technical analysis 
D)  push and shove 
E)  none of the above 
A)  descriptive analysis 
B)  visual hedging 
C)  technical analysis 
D)  push and shove 
E)  none of the above C

Question 4

The market price of the stock is a reflection of the potential earnings per share of the firm.

Accepted Answer

A) True 
 B)False

Question 5

If you purchase stock of big companies like Proctor & Gamble,General Electric,and Texaco you would be buying shares of ________ stocks.

Accepted Answer

A)  blue-chip 
B)  true-blue 
C)  mini-caps 
D)  speculative 
A)  blue-chip 
B)  true-blue 
C)  mini-caps 
D)  speculative

Question 6

Marian read in a financial magazine that the discounted dividends valuation model of common stock defines the value of a share of common stock as the ________ value of the infinite stream of future ________.

Accepted Answer

A)  future; growth 
B)  future; earnings 
C)  dividend; earnings 
D)  present; dividends 
E)  present; earnings 
A)  future; growth 
B)  future; earnings 
C)  dividend; earnings 
D)  present; dividends 
E)  present; earnings

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

A stock market characterized by increasing prices is termed a(n)________ market.

Accepted Answer

A)  bull 
B)  bear 
C)  animal 
D)  none of the above 
A)  bull 
B)  bear 
C)  animal 
D)  none of the above

Question 9

Abby previously owned 200 shares of NEWAGE stock at $25 per share.Today the company split the stock in a 3:1 split.Now what is the value of Abby's stock?

Accepted Answer

A)  $5,000 
B)  $6,000 
C)  $2,500 
D)  $200 
A)  $5,000 
B)  $6,000 
C)  $2,500 
D)  $200

Question 10

What is the importance of the P/E Ratio to investors?

Accepted Answer

The P/E ratio is a measure of risk and t

Question 11

The ratio of the annual dividend to the market price of the stock is called the

Accepted Answer

A)  retention ratio. 
B)  plowback ratio. 
C)  current ratio. 
D)  dividend yield. 
E)  none of the above. 
A)  retention ratio. 
B)  plowback ratio. 
C)  current ratio. 
D)  dividend yield. 
E)  none of the above.

Question 12

Common stockholders not only have the right to elect the board but also must approve day-to-day decisions of the chief executive officer.

Accepted Answer

A) True 
 B)False

Question 13

Dividends are paid regardless if the company makes a profit.

Accepted Answer

A) True 
 B)False

Question 14

You have just discovered one reason not to invest in stocks.What do you think it is?

Accepted Answer

A)  Stocks reduce risk through diversification. 
B)  Your tolerance of risk is low. 
C)  Over time, common stocks outperform all other investments. 
D)  Stocks are liquid. 
E)  Growth is determined by more than just interest rates. 
A)  Stocks reduce risk through diversification. 
B)  Your tolerance of risk is low. 
C)  Over time, common stocks outperform all other investments. 
D)  Stocks are liquid. 
E)  Growth is determined by more than just interest rates.

Question 15

The discounted dividends valuation model states that the value of a share of stock is the present value of its future dividends.

Accepted Answer

A) True 
 B)False

Question 16

A stock currently sells for $100 per share,and has earnings of $2.00 per share.What is the stock's P/E ratio?

Accepted Answer

A)  50.00 
B)  25.00 
C)  5.00 
D)  1.00 
A)  50.00 
B)  25.00 
C)  5.00 
D)  1.00

Question 17

If you are very optimistic about the ability of firms to earn profits today and in the immediate future,what type of investor philosophy do you exhibit?

Accepted Answer

A)  Animalistic 
B)  Bullish 
C)  Bearish 
D)  Psychic 
A)  Animalistic 
B)  Bullish 
C)  Bearish 
D)  Psychic

Question 18

Which feature of common stock ownership allows a stockholder to share in the company's earnings after the creditors are paid?

Accepted Answer

A)  Limited liability 
B)  Claim on income 
C)  Claims on assets 
D)  Voting rights 
A)  Limited liability 
B)  Claim on income 
C)  Claims on assets 
D)  Voting rights

Question 19

Explain the common stock features and rights as though you are speaking to a novice.

Accepted Answer

Common stocks have limited liability;tha

Question 20

The DJIA weights stocks based on

Accepted Answer

A)  the size of the company. 
B)  their place alphabetically. 
C)  their relative prices. 
D)  none of the above. 
A)  the size of the company. 
B)  their place alphabetically. 
C)  their relative prices. 
D)  none of the above.

Discuss the relationship between growth stocks and income stocks and their P/E ratios.

According to your text,there is very little validation in using technical analysis as an investing tool.

Your mother-in-law's stockbroker focuses on supply and demand,and uses charts and computer programs to identify and make buy-sell recommendations.She is using the ________ method.

The market price of the stock is a reflection of the potential earnings per share of the firm.

If you purchase stock of big companies like Proctor & Gamble,General Electric,and Texaco you would be buying shares of ________ stocks.

Marian read in a financial magazine that the discounted dividends valuation model of common stock defines the value of a share of common stock as the value of the infinite stream of future .

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

A stock market characterized by increasing prices is termed a(n)________ market.

Abby previously owned 200 shares of NEWAGE stock at $25 per share.Today the company split the stock in a 3:1 split.Now what is the value of Abby's stock?

What is the importance of the P/E Ratio to investors?

The ratio of the annual dividend to the market price of the stock is called the

Common stockholders not only have the right to elect the board but also must approve day-to-day decisions of the chief executive officer.

Dividends are paid regardless if the company makes a profit.

You have just discovered one reason not to invest in stocks.What do you think it is?

The discounted dividends valuation model states that the value of a share of stock is the present value of its future dividends.

A stock currently sells for $100 per share,and has earnings of $2.00 per share.What is the stock's P/E ratio?

If you are very optimistic about the ability of firms to earn profits today and in the immediate future,what type of investor philosophy do you exhibit?

Which feature of common stock ownership allows a stockholder to share in the company's earnings after the creditors are paid?

Explain the common stock features and rights as though you are speaking to a novice.

The DJIA weights stocks based on

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

Investment Basics

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 12: Investing in Stocks

Discuss the relationship between growth stocks and income stocks and their P/E ratios.

According to your text,there is very little validation in using technical analysis as an investing tool.

Your mother-in-law's stockbroker focuses on supply and demand,and uses charts and computer programs to identify and make buy-sell recommendations.She is using the ________ method.

The market price of the stock is a reflection of the potential earnings per share of the firm.

If you purchase stock of big companies like Proctor & Gamble,General Electric,and Texaco you would be buying shares of ________ stocks.

Marian read in a financial magazine that the discounted dividends valuation model of common stock defines the value of a share of common stock as the ________ value of the infinite stream of future ________.

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

A stock market characterized by increasing prices is termed a(n)________ market.

Abby previously owned 200 shares of NEWAGE stock at $25 per share.Today the company split the stock in a 3:1 split.Now what is the value of Abby's stock?

What is the importance of the P/E Ratio to investors?

The ratio of the annual dividend to the market price of the stock is called the

Common stockholders not only have the right to elect the board but also must approve day-to-day decisions of the chief executive officer.

Dividends are paid regardless if the company makes a profit.

You have just discovered one reason not to invest in stocks.What do you think it is?

The discounted dividends valuation model states that the value of a share of stock is the present value of its future dividends.

A stock currently sells for $100 per share,and has earnings of $2.00 per share.What is the stock's P/E ratio?

If you are very optimistic about the ability of firms to earn profits today and in the immediate future,what type of investor philosophy do you exhibit?

Which feature of common stock ownership allows a stockholder to share in the company's earnings after the creditors are paid?

Explain the common stock features and rights as though you are speaking to a novice.

The DJIA weights stocks based on

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

Investment Basics

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

Marian read in a financial magazine that the discounted dividends valuation model of common stock defines the value of a share of common stock as the value of the infinite stream of future .