Question 1

An investor with a strong appetite for risk should purchase a(n)________.

Accepted Answer

A)  cyclical stock 
B)  blue chip stock 
C)  growth stock 
D)  income stock 
E)  value stock 
A)  cyclical stock 
B)  blue chip stock 
C)  growth stock 
D)  income stock 
E)  value stock

Question 2

What reward do bond holders get for the risk they take?

Accepted Answer

A)  honor of supporting a struggling company 
B)  security of government guarantee for their money 
C)  option to buy more bonds in the company 
D)  ability to receive interest payments on money lent 
E)  the fact that they are entirely risk free 
A)  honor of supporting a struggling company 
B)  security of government guarantee for their money 
C)  option to buy more bonds in the company 
D)  ability to receive interest payments on money lent 
E)  the fact that they are entirely risk free

Question 3

A ________ stock will likely suffer the least amount of depreciation in a major recession.

Accepted Answer

A)  cyclical 
B)  blue chip 
C)  growth 
D)  defensive 
E)  income 
A)  cyclical 
B)  blue chip 
C)  growth 
D)  defensive 
E)  income

Question 4

Of the following investments,which has the lowest risk?

Accepted Answer

A)  government bonds 
B)  conservative mutual funds 
C)  futures 
D)  blue chip stocks 
E)  junk bonds 
A)  government bonds 
B)  conservative mutual funds 
C)  futures 
D)  blue chip stocks 
E)  junk bonds

Question 5

The notable advantage to investing in ________ is diversification.

Accepted Answer

A)  municipal bonds 
B)  mutual funds 
C)  blue chip stocks 
D)  T-bills 
E)  real estate 
A)  municipal bonds 
B)  mutual funds 
C)  blue chip stocks 
D)  T-bills 
E)  real estate

Question 6

A bear market is distinguished by ________.

Accepted Answer

A)  a declining stock market and increasing investor confidence 
B)  a declining stock market and decreasing investor confidence 
C)  an increasing stock market and increasing investor confidence 
D)  an increasing stock market and decreasing investor confidence 
E)  an increasing stock market and no investor confidence 
A)  a declining stock market and increasing investor confidence 
B)  a declining stock market and decreasing investor confidence 
C)  an increasing stock market and increasing investor confidence 
D)  an increasing stock market and decreasing investor confidence 
E)  an increasing stock market and no investor confidence

Question 7

A stockholder can receive a substantial amount of money in dividends,yet still wind up with a capital loss on a stock.

Accepted Answer

A) True 
 B)False

Question 8

Most companies that issue stock are legally required by the Securities and Exchange Commission to pay dividends to shareholders.

Accepted Answer

A) True 
 B)False

Question 9

A state government would issue a ________ bond to finance the construction of a toll bridge and then use the tolls to pay for the bond.

Accepted Answer

A)  general obligation 
B)  revenue 
C)  convertible 
D)  secure 
E)  T-note 
A)  general obligation 
B)  revenue 
C)  convertible 
D)  secure 
E)  T-note

Question 10

A wise investor will practice either diversification or asset allocation,but not both.

Accepted Answer

A) True 
 B)False

Question 11

A(n)________ stock is issued by a young and expanding company and usually doesn't pay a dividend.

Accepted Answer

A)  blue chip 
B)  income 
C)  defensive 
D)  growth 
E)  cyclical 
A)  blue chip 
B)  income 
C)  defensive 
D)  growth 
E)  cyclical

Question 12

What does NAV stand for?

Accepted Answer

A)  new archive value 
B)  net asset value 
C)  net allocation variety 
D)  new asset venture 
E)  net allocation venture 
A)  new archive value 
B)  net asset value 
C)  net allocation variety 
D)  new asset venture 
E)  net allocation venture

Question 13

A corporate bond backed only by a company's promise to pay is called a ________.

Accepted Answer

A)  debenture bond 
B)  secured bond 
C)  convertible bond 
D)  promissory bond 
E)  municipal bond 
A)  debenture bond 
B)  secured bond 
C)  convertible bond 
D)  promissory bond 
E)  municipal bond

Question 14

A corporate bond backed by collateral is called a ________.

Accepted Answer

A)  debenture bond 
B)  secured bond 
C)  convertible bond 
D)  treasury bond 
E)  treasury note 
A)  debenture bond 
B)  secured bond 
C)  convertible bond 
D)  treasury bond 
E)  treasury note

Question 15

________ is having a variety of investments in your portfolio,such as different types of companies in different industries.

Accepted Answer

A)  An initial public offering 
B)  Compound interest 
C)  A risk-return relationship 
D)  Risk tolerance 
E)  Diversification 
A)  An initial public offering 
B)  Compound interest 
C)  A risk-return relationship 
D)  Risk tolerance 
E)  Diversification

Question 16

A company's capitalization or value is equal to the number of outstanding shares of stock times the price of one share of stock.

Accepted Answer

A) True 
 B)False

Question 17

Of the following investments,which has the lowest risk?

Accepted Answer

A)  government bonds 
B)  bond mutual funds 
C)  corporate bonds 
D)  Treasury bills 
E)  cap stocks 
A)  government bonds 
B)  bond mutual funds 
C)  corporate bonds 
D)  Treasury bills 
E)  cap stocks

Question 18

An automobile company stock can best be characterized as being a ________ stock.

Accepted Answer

A)  growth 
B)  cyclical 
C)  defensive 
D)  blue chip 
E)  value 
A)  growth 
B)  cyclical 
C)  defensive 
D)  blue chip 
E)  value

Question 19

Discuss the important characteristics of three of the main types of stocks.Then identify which type of stock would most appeal to someone with a very high risk tolerance.Finally,identify the type of stock most likely to pay the highest dividend on a steady basis.

Accepted Answer

Student answers will vary.Income stocks

Question 20

Which index does not include financial institutions but does include companies incorporated outside of the United States?

Accepted Answer

A)  DJIA 
B)  NASDAQ 100 
C)  S&P 500 
D)  NYSE 
E)  TIPS 
A)  DJIA 
B)  NASDAQ 100 
C)  S&P 500 
D)  NYSE 
E)  TIPS

Exam 16: Investment Opportunities in the Securities Market

An investor with a strong appetite for risk should purchase a(n)________.

What reward do bond holders get for the risk they take?

A ________ stock will likely suffer the least amount of depreciation in a major recession.

Of the following investments,which has the lowest risk?

The notable advantage to investing in ________ is diversification.

A bear market is distinguished by ________.

A stockholder can receive a substantial amount of money in dividends,yet still wind up with a capital loss on a stock.

Most companies that issue stock are legally required by the Securities and Exchange Commission to pay dividends to shareholders.

A state government would issue a ________ bond to finance the construction of a toll bridge and then use the tolls to pay for the bond.

A wise investor will practice either diversification or asset allocation,but not both.

A(n)________ stock is issued by a young and expanding company and usually doesn't pay a dividend.

What does NAV stand for?

A corporate bond backed only by a company's promise to pay is called a ________.

A corporate bond backed by collateral is called a ________.

________ is having a variety of investments in your portfolio,such as different types of companies in different industries.

A company's capitalization or value is equal to the number of outstanding shares of stock times the price of one share of stock.

Of the following investments,which has the lowest risk?

An automobile company stock can best be characterized as being a ________ stock.

Discuss the important characteristics of three of the main types of stocks.Then identify which type of stock would most appeal to someone with a very high risk tolerance.Finally,identify the type of stock most likely to pay the highest dividend on a steady basis.

Which index does not include financial institutions but does include companies incorporated outside of the United States?

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