Exam 16: Investment and Securities

An investor's ability and willingness to accept risk is termed:

A middleman,or agent,who helps investors trade financial instruments such as stocks,bonds,and derivatives is called a(n)

All else equal,investors who are risk averse will pay more for a security with a higher level of risk.

Speculators are investors who view investments as instruments that produce growth over a long period of time.

A ____ order is an order to execute at the best price available when the transaction reaches the market.

Financial instruments that offer steady interest or dividend payments are called income securities because they are good income-producing investments.

Even though the simple arithmetic average does not consider compounding,it is useful for determining the average return for a group of investments at one point in time.

Because stocks must be traded in round lots,or multiples of 100 shares,on the organized exchanges,individual investors can only trade in multiples of 100 shares at a time.

When an investor places a stop order,he or she is telling the broker to "stop" an order that was placed previously but hasn't been executed yet.

Angela Johnson bought Microsoft stock many years ago when the company was very young;so,clearly,she has done very well with her investment.Now that Microsoft is more established,its stock price has started to falter somewhat.Angela really thinks that Microsoft will continue to be a good investment in the future,so she plans to stay in the stock for the time being.However,at the same time,she wants to protect the profits she has already amassed.She follows the market every day,so she is confident she can initiate a sell order when necessary to ensure she receives the gains she has realized to this point.Unfortunately,Angela is leaving the country for an extended vacation in China,where she will be out of touch with the investment world,and she is worried that something might happen to Microsoft during the time she is gone that will substantially decrease the "paper" profits she now has.Given that Angela believes Microsoft will continue its upward movement but she also wants to protect her "paper" profits,which of the following orders should she place with her broker before she leaves for China?

A long-term investment strategy where investors purchase securities with the intent to keep them for a long period before liquidation is called

An order that gives instructions to cancel the order if the price conditions are not met when the order reaches the market is called a ____ order.

An investor earned a holding period return equal to 10 percent on a stock that she purchased for $27.50.During the time she held the stock,the company paid a $2 dividend.For what price did the investor sell the stock?

A firm that offers clients only the basic services associated with trading securities is called a(n)

A brokerage firm that offers a variety of services to its clients,including research information about stocks and bonds,monthly publications that contain investment recommendations,and investment advisory services is called a(n)

Margin trading allows investors to magnify the returns earned on their investments.This means that if a stock that is purchased on margin experiences a price increase of 15 percent,the investor actually receives a return greater than 15 percent,even if no dividends are paid,and vice versa.

At the beginning of 2010,Steve purchased ACME stock on margin.The initial margin requirement is 50 percent and the broker loan rate is 8 percent.Steve invested $15,000 of his own funds and margined the maximum amount allowed by the broker to purchase ACME stock.At the time,the purchase price of the stock was $25 a share.No dividends were paid during the year,and the stock was sold for $32 a share at the end of the 2010.What is the one-year holding period return for this investment?

The average return earned by a portfolio of stocks can be computed by summing the returns associated with the individual stocks and then dividing the result by the number of stocks in the portfolio.

A market order,which is an order to trade at the best price available when the transaction reaches the market,is the most common type of order placed by investors.

Foxy Ladies Investment Club The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010. A summary of their portfolio is given below: -Refer to Foxy Ladies Investment Club.What was the portfolio's geometric average return per year from 2010 through 2012?