Question 1

Discuss three reasons why dollar-cost averaging is an important concept to investors.

Accepted Answer

If you buy stock over an extended period

Question 2

Technical analysis focuses on supply and demand,using charts and computer programs to project stock trends.

Accepted Answer

A) True 
 B)False

Question 3

When all stocks move in the same direction,diversification among stocks works just as well as ever.

Accepted Answer

A) True 
 B)False

Question 4

Earnings per share is a ratio that describes the amount of net income less preferred stock dividends available to the common shareholders.

Accepted Answer

A) True 
 B)False

Question 5

A proxy is a legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.

Accepted Answer

A) True 
 B)False

Question 6

If your portfolio is very diversified then the beta is of no use to you.

Accepted Answer

A) True 
 B)False

Question 7

For several years you have been using charts and computer programs to project trends in the stock market.You are engaging in what type of analysis?

Accepted Answer

A)  Dollar cost averaging 
B)  Technical 
C)  Fundamental 
D)  Price/Earnings 
E)  None of the above 
A)  Dollar cost averaging 
B)  Technical 
C)  Fundamental 
D)  Price/Earnings 
E)  None of the above

Question 8

Deborah recently purchased a stock that is considerably more risky than a typical stock.It has exhibited a high degree of earnings variability.This is an example of a(n)________ stock.

Accepted Answer

A)  speculative 
B)  blue-chip 
C)  income 
D)  mid-cap 
A)  speculative 
B)  blue-chip 
C)  income 
D)  mid-cap

Question 9

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 10

Income stocks pay relatively low dividends,and offer a high potential for capital appreciation.

Accepted Answer

A) True 
 B)False

Question 11

The following equation,(net income - preferred stock dividends)/number of shares of common stock outstanding,allows us to calculate the ________ and this information is necessary to calculate the ________ ratio.

Accepted Answer

A)  dividend yield; dividend 
B)  earnings per share; P/E 
C)  market-to-book ratio; book-to-market 
D)  stock growth: P/E 
E)  price-to-book ratio; market-to-book 
A)  dividend yield; dividend 
B)  earnings per share; P/E 
C)  market-to-book ratio; book-to-market 
D)  stock growth: P/E 
E)  price-to-book ratio; market-to-book

Question 12

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

Question 13

What point marks the purchase of common stock without a right to a declared dividend?

Accepted Answer

A)  Dividend payout date 
B)  Declaration date 
C)  Ex-dividend date 
D)  Cut-off point 
E)  End of fiscal year 
A)  Dividend payout date 
B)  Declaration date 
C)  Ex-dividend date 
D)  Cut-off point 
E)  End of fiscal year

Question 14

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

Accepted Answer

A)  dividend reinvestment 
B)  stock split 
C)  stock repurchase 
D)  stock reissue 
E)  none of the above 
A)  dividend reinvestment 
B)  stock split 
C)  stock repurchase 
D)  stock reissue 
E)  none of the above

Question 15

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 16

Your friend has recommended that you purchase stock in company XYZ.It is expected to pay a $4 dividend,and has historically grown at 5%.If the required rate of return is 12%,what is the estimated value of a share of XYZ stock?

Accepted Answer

A)  $23.53 
B)  $33.34 
C)  $57.14 
D)  $80.00 
A)  $23.53 
B)  $33.34 
C)  $57.14 
D)  $80.00

Question 17

Coca-Cola is an example of a red-chip stock.

Accepted Answer

A) True 
 B)False

Question 18

Capital appreciation refers to an increase in the selling price of your shares of stock.

Accepted Answer

A) True 
 B)False

Question 19

A buy-and-hold investment strategy means that an investor's gains will be taxed as short-term capital gains.

Accepted Answer

A) True 
 B)False

Question 20

Why is using the P/E ratio a very popular valuation tool?

Accepted Answer

Many investors use the P/E ratio because

Discuss three reasons why dollar-cost averaging is an important concept to investors.

Technical analysis focuses on supply and demand,using charts and computer programs to project stock trends.

When all stocks move in the same direction,diversification among stocks works just as well as ever.

Earnings per share is a ratio that describes the amount of net income less preferred stock dividends available to the common shareholders.

A proxy is a legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.

If your portfolio is very diversified then the beta is of no use to you.

For several years you have been using charts and computer programs to project trends in the stock market.You are engaging in what type of analysis?

Deborah recently purchased a stock that is considerably more risky than a typical stock.It has exhibited a high degree of earnings variability.This is an example of a(n)________ stock.

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.

Income stocks pay relatively low dividends,and offer a high potential for capital appreciation.

The following equation,(net income - preferred stock dividends)/number of shares of common stock outstanding,allows us to calculate the and this information is necessary to calculate the ratio.

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.

What point marks the purchase of common stock without a right to a declared dividend?

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

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?

Your friend has recommended that you purchase stock in company XYZ.It is expected to pay a $4 dividend,and has historically grown at 5%.If the required rate of return is 12%,what is the estimated value of a share of XYZ stock?

Coca-Cola is an example of a red-chip stock.

Capital appreciation refers to an increase in the selling price of your shares of stock.

A buy-and-hold investment strategy means that an investor's gains will be taxed as short-term capital gains.

Why is using the P/E ratio a very popular valuation tool?

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 three reasons why dollar-cost averaging is an important concept to investors.

Technical analysis focuses on supply and demand,using charts and computer programs to project stock trends.

When all stocks move in the same direction,diversification among stocks works just as well as ever.

Earnings per share is a ratio that describes the amount of net income less preferred stock dividends available to the common shareholders.

A proxy is a legal agreement a stockholder signs to allow someone else to vote for him or her at the corporation's annual meeting.

If your portfolio is very diversified then the beta is of no use to you.

For several years you have been using charts and computer programs to project trends in the stock market.You are engaging in what type of analysis?

Deborah recently purchased a stock that is considerably more risky than a typical stock.It has exhibited a high degree of earnings variability.This is an example of a(n)________ stock.

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.

Income stocks pay relatively low dividends,and offer a high potential for capital appreciation.

The following equation,(net income - preferred stock dividends)/number of shares of common stock outstanding,allows us to calculate the ________ and this information is necessary to calculate the ________ ratio.

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.

What point marks the purchase of common stock without a right to a declared dividend?

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

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?

Your friend has recommended that you purchase stock in company XYZ.It is expected to pay a $4 dividend,and has historically grown at 5%.If the required rate of return is 12%,what is the estimated value of a share of XYZ stock?

Coca-Cola is an example of a red-chip stock.

Capital appreciation refers to an increase in the selling price of your shares of stock.

A buy-and-hold investment strategy means that an investor's gains will be taxed as short-term capital gains.

Why is using the P/E ratio a very popular valuation tool?

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

The following equation,(net income - preferred stock dividends)/number of shares of common stock outstanding,allows us to calculate the and this information is necessary to calculate the ratio.