Question 1

Which of the following statements regarding investment objectives is incorrect?

Accepted Answer

A)  The goals must be realistic in terms of economic conditions. 
B)  The goals must be tailored to the individual. 
C)  The goals must be specific and measurable. 
D)  The goals must be oriented toward the future. 
E)  All of these answers are correct. 
A)  The goals must be realistic in terms of economic conditions. 
B)  The goals must be tailored to the individual. 
C)  The goals must be specific and measurable. 
D)  The goals must be oriented toward the future. 
E)  All of these answers are correct.

Question 2

A(n) ____ fund is a fund that invests in the stocks contained in a specific stock index.

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  exchange-traded 
E)  net asset 
A)  A 
B)  B 
C)  C 
D)  exchange-traded 
E)  net asset

Question 3

For mutual funds, the yearly management fees generally range between ____ percent.

Accepted Answer

A)  2.5 and 3.0 
B)  2.0 and 2.5 
C)  1.5 and 2.0 
D)  1.0 and 1.5 
E)  0.25 and 1.5 
A)  2.5 and 3.0 
B)  2.0 and 2.5 
C)  1.5 and 2.0 
D)  1.0 and 1.5 
E)  0.25 and 1.5

Question 4

Another name for a 12b-1 fee is a

Accepted Answer

A)  distribution fee. 
B)  redemption fee. 
C)  sales fee. 
D)  management fee. 
E)  mutual fund tax. 
A)  distribution fee. 
B)  redemption fee. 
C)  sales fee. 
D)  management fee. 
E)  mutual fund tax.

Question 5

The requirement that investors should have access to all important facts about stocks, bonds, and other securities so that they can make informed decisions is called

Accepted Answer

A)  SEC Reporting Requirements. 
B)  full disclosure. 
C)  the Insider Equity Act. 
D)  the NASDAQ Rule. 
E)  the Securities Investor Protection Act. 
A)  SEC Reporting Requirements. 
B)  full disclosure. 
C)  the Insider Equity Act. 
D)  the NASDAQ Rule. 
E)  the Securities Investor Protection Act.

Question 6

According to Suze Orman, how much of Jackie Martin's portfolio should be invested in growth investments if she is 40 years old?

Accepted Answer

A)  33 percent 
B)  40 percent 
C)  50 percent 
D)  70 percent 
E)  90 percent 
A)  33 percent 
B)  40 percent 
C)  50 percent 
D)  70 percent 
E)  90 percent

Question 7

Real estate ownership represents one of the best hedges against inflation, but not all property will increase in value. Which of the following can result in a piece of property decreasing in value?

Accepted Answer

A)  Good neighbors 
B)  A well-planned community 
C)  Excellent construction 
D)  Good financing 
E)  Poor location 
A)  Good neighbors 
B)  A well-planned community 
C)  Excellent construction 
D)  Good financing 
E)  Poor location

Question 8

A request that a stock be purchased or sold at the current market price is called a

Accepted Answer

A)  market order. 
B)  limit order. 
C)  margin order. 
D)  spot trade. 
E)  round-lot order. 
A)  market order. 
B)  limit order. 
C)  margin order. 
D)  spot trade. 
E)  round-lot order.

Question 9

The purpose of a budget is to

Accepted Answer

A)  determine the amount of your total liabilities. 
B)  develop a plan for spending your future income over a specific time period. 
C)  reduce total assets. 
D)  increase monthly expenses. 
E)  develop a plan for increasing credit purchases. 
A)  determine the amount of your total liabilities. 
B)  develop a plan for spending your future income over a specific time period. 
C)  reduce total assets. 
D)  increase monthly expenses. 
E)  develop a plan for increasing credit purchases.

Question 10

Delores Hudgins wants to choose an investment that will provide tax-free income. Which of the following investments would you recommend?

Accepted Answer

A)  Municipal options 
B)  Municipal bonds 
C)  Corporate bonds 
D)  Preferred stock 
E)  Common stock 
A)  Municipal options 
B)  Municipal bonds 
C)  Corporate bonds 
D)  Preferred stock 
E)  Common stock

Question 11

A personal income statement lists your ____ and ____ for a specific period of time.

Accepted Answer

A)  assets; budgeted amounts 
B)  liabilities; assets 
C)  assets; liabilities 
D)  expenses; net worth 
E)  income; expenses 
A)  assets; budgeted amounts 
B)  liabilities; assets 
C)  assets; liabilities 
D)  expenses; net worth 
E)  income; expenses

Question 12

The act enacted to improve corporate accountability and financial reporting is the

Accepted Answer

A)  Insider Trading and Securities Fraud Act. 
B)  Financial Services Modernization Act. 
C)  Securities Investor Protection Act. 
D)  Sarbanes-Oxley Act. 
E)  Securities Exchange Act. 
A)  Insider Trading and Securities Fraud Act. 
B)  Financial Services Modernization Act. 
C)  Securities Investor Protection Act. 
D)  Sarbanes-Oxley Act. 
E)  Securities Exchange Act.

Question 13

Axon Corporation decides to issue convertible bonds. Why might Axon prefer to issue convertible bonds?

Accepted Answer

A)  It will receive more money from selling convertible bonds. 
B)  It will not have to make interest payments on convertible bonds. 
C)  Convertible bonds generally carry a lower interest rate than regular bonds. 
D)  Issuing convertible bonds generally increases a corporation's sales. 
E)  Convertible bonds do not have to be paid back if they are not converted. 
A)  It will receive more money from selling convertible bonds. 
B)  It will not have to make interest payments on convertible bonds. 
C)  Convertible bonds generally carry a lower interest rate than regular bonds. 
D)  Issuing convertible bonds generally increases a corporation's sales. 
E)  Convertible bonds do not have to be paid back if they are not converted.

Question 14

Although Howard has a substantial amount of money to invest, he has very little time or desire to research companies in order to make investment decisions. What would likely be the best option for Howard's investment management?

Accepted Answer

A)  He should hire a discount broker. 
B)  He should invest the money himself without an account executive. 
C)  He should use a full-service broker to help him invest. 
D)  He should do all his researching and investing online. 
E)  He should use an exchange such as the NYSE. 
A)  He should hire a discount broker. 
B)  He should invest the money himself without an account executive. 
C)  He should use a full-service broker to help him invest. 
D)  He should do all his researching and investing online. 
E)  He should use an exchange such as the NYSE.

Question 15

Interest payments on corporate bonds are usually paid

Accepted Answer

A)  every month. 
B)  every quarter. 
C)  every six months. 
D)  every year. 
E)  when the bond matures. 
A)  every month. 
B)  every quarter. 
C)  every six months. 
D)  every year. 
E)  when the bond matures.

Question 16

The board of directors of Netflix declared a two- for-one stock split. If Sally Smith owned 400 shares before the split, how many shares does she own after the split?

Accepted Answer

A)  200 
B)  400 
C)  600 
D)  800 
E)  1,000 
A)  200 
B)  400 
C)  600 
D)  800 
E)  1,000

Question 17

If an investor makes a short sale of Yahoo! stock and then the price of the stock decreases, the investor

Accepted Answer

A)  loses money. 
B)  must repay the borrowed money. 
C)  makes money. 
D)  does not make or lose any money. 
E)  will sell the stock back. 
A)  loses money. 
B)  must repay the borrowed money. 
C)  makes money. 
D)  does not make or lose any money. 
E)  will sell the stock back.

Question 18

Today a regulatory pyramid consisting of ____ levels exists to make sure that investors are protected.

Accepted Answer

A)  two 
B)  three 
C)  four 
D)  five 
E)  ten 
A)  two 
B)  three 
C)  four 
D)  five 
E)  ten

Question 19

Investments in gemstones, precious metals, and collectibles are all considered

Accepted Answer

A)  low risk. 
B)  highly profitable. 
C)  estate investments. 
D)  optioning. 
E)  high risk. 
A)  low risk. 
B)  highly profitable. 
C)  estate investments. 
D)  optioning. 
E)  high risk.

Question 20

Lillian decides to use the money she has saved to earn a financial return. This is called a(n)

Accepted Answer

A)  investment goal. 
B)  investment plan. 
C)  financial plan. 
D)  bank account. 
E)  personal investment. 
A)  investment goal. 
B)  investment plan. 
C)  financial plan. 
D)  bank account. 
E)  personal investment.

Exam 20: A: Understanding Personal Finances and Investments

Which of the following statements regarding investment objectives is incorrect?

A(n) ____ fund is a fund that invests in the stocks contained in a specific stock index.

For mutual funds, the yearly management fees generally range between ____ percent.

Another name for a 12b-1 fee is a

The requirement that investors should have access to all important facts about stocks, bonds, and other securities so that they can make informed decisions is called

According to Suze Orman, how much of Jackie Martin's portfolio should be invested in growth investments if she is 40 years old?

Real estate ownership represents one of the best hedges against inflation, but not all property will increase in value. Which of the following can result in a piece of property decreasing in value?

A request that a stock be purchased or sold at the current market price is called a

The purpose of a budget is to

Delores Hudgins wants to choose an investment that will provide tax-free income. Which of the following investments would you recommend?

A personal income statement lists your ____ and ____ for a specific period of time.

The act enacted to improve corporate accountability and financial reporting is the

Axon Corporation decides to issue convertible bonds. Why might Axon prefer to issue convertible bonds?

Although Howard has a substantial amount of money to invest, he has very little time or desire to research companies in order to make investment decisions. What would likely be the best option for Howard's investment management?

Interest payments on corporate bonds are usually paid

The board of directors of Netflix declared a two- for-one stock split. If Sally Smith owned 400 shares before the split, how many shares does she own after the split?

If an investor makes a short sale of Yahoo! stock and then the price of the stock decreases, the investor

Today a regulatory pyramid consisting of ____ levels exists to make sure that investors are protected.

Investments in gemstones, precious metals, and collectibles are all considered

Lillian decides to use the money she has saved to earn a financial return. This is called a(n)

Exploring the World of Business and Economics

A: Being Ethical and Socially Responsible

B: Being Ethical and Socially Responsible

A: Exploring Global Business

B: Exploring Global Business

Choosing a Form of Business Ownership

Small Business, Entrepreneurship, and Franchises

Understanding the Management Process

Creating a Flexible Organization

Producing Quality Goods and Services

Attracting and Retaining the Best Employees

Motivating and Satisfying Employees and Teams

Enhancing Union-Management Relations

Building Customer Relationships Through Effective Marketing

A: Creating and Pricing Products That Satisfy Customers

B: Creating and Pricing Products That Satisfy Customers

Wholesaling, Retailing, and Physical Distribution

Developing Integrated Marketing Communications

Social Media, E-Business, and Accounting

Using Management and Accounting Information

Understanding Money, Banking, and Credit

Mastering Financial Management

B: Understanding Personal Finances and Investments

Filters

A personal income statement lists your and for a specific period of time.