Exam 14: Investing in Stocks and Bonds

When the price of a stock declines to the point where the investor's equity is less than the required percentage,the brokerage firm will make a telephone call to the investor telling him or her to immediately either provide more collateral or face having the investment liquidated.This procedure is known as a(n)

Reinvestment risk is the risk that the return on a future investment will not be the same as the return earned by the original investment.

Earnings per share (EPS) indicate the income a company has available to pay as dividends and reinvest as retained earnings.

A bond rating represents the opinion of an insider on the quality of the issuing organization.

When a stockbroker sells securities owned by the firm for which he or she works,the investor must be informed of that fact.

Which of the following statements regarding U.S.savings bonds is most likely to provide a hedge against inflation?

An employee stock option is a gift,like a bonus,from an employer to an employee that allows employees to benefit from the appreciation of their employer's stock without putting any money down.

Ronny is considering investing in Markman,Inc.The current price of Markman is $40 a share,the after-tax earnings are $21,600,000,and there are 10,000,000 outstanding shares of common stock.What is Markman's price/earnings ratio?

Stephanie bought 250 shares of Discover stock in 1988.Recently the company declared a four-for-one stock split.Which of the following statements is true?

Bonds are debt obligations of the issuer.

The dividend income on preferred stock is generally fixed and limited to a stated amount per share.

U.S.government securities are considered almost risk-free.

A corporate bond rated AAA would pay a higher rate of interest than a corporate bond rated BBB.

Investors can obtain a company's 10-K and 10-Q reports from the Securities and Exchange Commission.

The market price of bonds are sensitive to interest rates.

Use the following stock listing for transactions on December 12 to answer the questions: -What was QPZ's closing price on December 12?  $25.00 per share

Rapidly growing companies tend to have P/E ratios above those of speculative companies.

The fundamental approach presumes that current and future earnings,trends,industry outlook,and management's expertise determine a stock's price movement.

Maxwell Communications Corporation has after-tax earnings of $1,508,000 after paying $45,000 in dividends to its 10,000 preferred stockholders.If Maxwell has 500,000 common stockholders,its earnings per share are

Bonds pay the face value to the investor when they are