Exam 14: Investing in Stocks

Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy. What type of stock is Kay thinking about adding to her portfolio?

Earnings per share is a corporation's after-tax earnings divided by the number of stockholders. Earnings per share = After-tax income/Number of shares outstanding

Convertible preferred stock may be exchanged, at the corporation's option, for a specified number of shares of common stock.

A stock that remains stable during declines in the economy is called a(n) ____________ stock.

A stock that sells for less than $1 per share is called a _____ stock.

On May 24, 2010, Kurt Rogers bought 100 shares of stock from XYZ Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How much will Kurt receive for this quarterly dividend?

From an investor's standpoint, an increase in estimates of earnings per share is a good sign.

A request that a stock be bought or sold at the current market price is called a ____________ order.

James Brewer purchased 100 shares of stock for $72 a share. James also paid $55 commission. What was the total purchase price for this transaction?

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed?

If the board of directors approves a two-for-one stock split, an investor who owns 150 shares before the split will own ____________ shares after the split.

A market in which an investor purchases financial securities (via an investment bank or other representative) from the issuer of those securities is called the ____________ market.

The Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Index.

An investment theory based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called the ____________ theory.

The beta of the S&P 500 is:

Which one of the following statements is true?

If a corporation's earnings decline, the stock's value usually increases.

Since 1926, stocks as measured by the Standard & Poor's 500 Index have returned on average about 10 percent a year.

An investment bank is a financial institution that assists corporations with issuing new shares of stock.

Stock dividends are determined by the: