Question 1

Common stockholders are considered to be the residual owners of a company.

Accepted Answer

A) True 
 B)False  True

Question 2

Dividend reinvestment plans should be avoided because of their relatively high cost.

Accepted Answer

A) True 
 B)False  False

Question 3

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9 percent,the fully taxable equivalent yield would be:

Accepted Answer

A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%. 
A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%. C

Question 4

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8 percent.Presently,new bonds issued with a similar creditworthiness have a 10 percent interest rate.Which of the following is most likely to be true about the bond?

Accepted Answer

A) It is currently selling for a premium. 
B) It is currently selling at a discount. 
C) It is currently selling at par. 
D) It is likely to be retired. 
E) The bond's coupon rate increases. 
A) It is currently selling for a premium. 
B) It is currently selling at a discount. 
C) It is currently selling at par. 
D) It is likely to be retired. 
E) The bond's coupon rate increases.

Question 5

The net income of Sunrise Corporation is $5 million and shareholders' equity is $50 million.The return on equity is _____.

Accepted Answer

A) 5% 
B) 10% 
C) 20% 
D) 15% 
E) 25% 
A) 5% 
B) 10% 
C) 20% 
D) 15% 
E) 25%

Question 6

The _____ of a stock reflects stockholders' confidence.

Accepted Answer

A) par value 
B) book value 
C) earnings per share 
D) price/earnings ratio 
E) dividend yield 
A) par value 
B) book value 
C) earnings per share 
D) price/earnings ratio 
E) dividend yield

Question 7

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

Accepted Answer

A) True 
 B)False

Question 8

To most stockholders,the main advantages of common stock investments are:

Accepted Answer

A) attractive returns and active trading. 
B) guaranteed returns and voting rights. 
C) high interest payment and active trading. 
D) high risk and guaranteed returns. 
E) low risk and guaranteed returns. 
A) attractive returns and active trading. 
B) guaranteed returns and voting rights. 
C) high interest payment and active trading. 
D) high risk and guaranteed returns. 
E) low risk and guaranteed returns.

Question 9

When the market interest rate decreases,the bond:

Accepted Answer

A) price increases. 
B) maturity period decreases. 
C) coupon rate decreases. 
D) current yield increases. 
E) yield to maturity increases. 
A) price increases. 
B) maturity period decreases. 
C) coupon rate decreases. 
D) current yield increases. 
E) yield to maturity increases.

Question 10

For a U.S resident,the best way to minimize exchange rate risk when investing in foreign stocks is to __________. ​

Accepted Answer

A) buy defensive stocks 
B) buy municipal bonds 
C) invest in Certificate of Deposits (CDs) 
D) buy American Depositary Receipts (ADRs) 
A) buy defensive stocks 
B) buy municipal bonds 
C) invest in Certificate of Deposits (CDs) 
D) buy American Depositary Receipts (ADRs)

Question 11

The current net income of Sigma Inc.is $8 million,market price of the stock is $65,and sales is $50 million? Which of the following is the net profit margin of Sigma Inc.?

Accepted Answer

A) 10% 
B) 28% 
C) 16% 
D) 8% 
E) 22% 
A) 10% 
B) 28% 
C) 16% 
D) 8% 
E) 22%

Question 12

Suppose the earnings per share of a stock is $2 and the current price/earnings (P/E)ratio is 10.What is the current price of the stock?

Accepted Answer

A) $5 
B) $8 
C) $20 
D) $40 
E) $35 
A) $5 
B) $8 
C) $20 
D) $40 
E) $35

Question 13

Bonds have higher returns when compared to stocks.

Accepted Answer

A) True 
 B)False

Question 14

Earnings per share can be defined as the return earned on behalf of each share of common and preferred stock,calculated by dividing all earnings by the total number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 15

A callable bond allows the issuer to retire the security prior to maturity.

Accepted Answer

A) True 
 B)False

Question 16

Damien plans to buy a share at $120 and hold it for five years.During this period,he would receive average annual dividends of $4 a share.He expects to receive $145 at the end of the five-year period when he sells the share.What are the keystrokes used to calculate the rate of return on the investment?

Accepted Answer

A) N = 5,PV = -120,PMT = 4,FV = 145 
B) N = 5,PV = 120,PMT = 4,FV = -145 
C) N = 5,PV = -145,PMT = -4,FV = 120 
D) N = 4,PV = -120,PMT = 5,FV = 145 
E) N = 4,PV = 145,PMT = 5,FV = -120 
A) N = 5,PV = -120,PMT = 4,FV = 145 
B) N = 5,PV = 120,PMT = 4,FV = -145 
C) N = 5,PV = -145,PMT = -4,FV = 120 
D) N = 4,PV = -120,PMT = 5,FV = 145 
E) N = 4,PV = 145,PMT = 5,FV = -120

Question 17

A Puppy Pet Services $1,000 bond has a 7.5 percent coupon rate,matures in 2016,and is currently quoted at $820.The current yield is:

Accepted Answer

A) 6.15 percent. 
B) 7.50 percent. 
C) 9.15 percent. 
D) 10.27 percent. 
E) 11.43 percent. 
A) 6.15 percent. 
B) 7.50 percent. 
C) 9.15 percent. 
D) 10.27 percent. 
E) 11.43 percent.

Question 18

Which of the following statements about risk is correct?

Accepted Answer

A) The higher the risk,the higher the expected return. 
B) The higher the risk,the lower the return. 
C) The lower the risk,the greater the maturity value of the investment. 
D) The higher the risk,the lower the maturity value of the investment. 
E) The higher the risk,the lower the risk-free rate. 
A) The higher the risk,the higher the expected return. 
B) The higher the risk,the lower the return. 
C) The lower the risk,the greater the maturity value of the investment. 
D) The higher the risk,the lower the maturity value of the investment. 
E) The higher the risk,the lower the risk-free rate.

Question 19

In the stock market,the market cap of a large-cap stock is __________. ​

Accepted Answer

A) more than $10 billion 
B) more than $20 billion 
C) less than $5 billion 
D) less than $2 billion 
A) more than $10 billion 
B) more than $20 billion 
C) less than $5 billion 
D) less than $2 billion

Question 20

Bonds issued by political subdivisions of the U.S.government but not guaranteed by the government are called:

Accepted Answer

A) federal bonds. 
B) agency bonds. 
C) treasury bonds. 
D) municipal bonds. 
E) trust bonds. 
A) federal bonds. 
B) agency bonds. 
C) treasury bonds. 
D) municipal bonds. 
E) trust bonds.

Common stockholders are considered to be the residual owners of a company.

Dividend reinvestment plans should be avoided because of their relatively high cost.

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9 percent,the fully taxable equivalent yield would be:

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8 percent.Presently,new bonds issued with a similar creditworthiness have a 10 percent interest rate.Which of the following is most likely to be true about the bond?

The net income of Sunrise Corporation is $5 million and shareholders' equity is $50 million.The return on equity is _____.

The _____ of a stock reflects stockholders' confidence.

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

To most stockholders,the main advantages of common stock investments are:

When the market interest rate decreases,the bond:

For a U.S resident,the best way to minimize exchange rate risk when investing in foreign stocks is to __________.

The current net income of Sigma Inc.is $8 million,market price of the stock is $65,and sales is $50 million? Which of the following is the net profit margin of Sigma Inc.?

Suppose the earnings per share of a stock is $2 and the current price/earnings (P/E)ratio is 10.What is the current price of the stock?

Bonds have higher returns when compared to stocks.

Earnings per share can be defined as the return earned on behalf of each share of common and preferred stock,calculated by dividing all earnings by the total number of shares outstanding.

A callable bond allows the issuer to retire the security prior to maturity.

A Puppy Pet Services $1,000 bond has a 7.5 percent coupon rate,matures in 2016,and is currently quoted at $820.The current yield is:

Which of the following statements about risk is correct?

In the stock market,the market cap of a large-cap stock is __________.

Bonds issued by political subdivisions of the U.S.government but not guaranteed by the government are called:

Understanding the Financial Planning Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Mutual Funds, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

Exam 12: Investing in Stocks and Bonds

Common stockholders are considered to be the residual owners of a company.

Dividend reinvestment plans should be avoided because of their relatively high cost.

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that has a stated interest rate of 6.9 percent,the fully taxable equivalent yield would be:

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8 percent.Presently,new bonds issued with a similar creditworthiness have a 10 percent interest rate.Which of the following is most likely to be true about the bond?

The net income of Sunrise Corporation is $5 million and shareholders' equity is $50 million.The return on equity is _____.

The _____ of a stock reflects stockholders' confidence.

Compound interest is a very important concept when evaluating the return on an investment you plan to hold for a long time.

To most stockholders,the main advantages of common stock investments are:

When the market interest rate decreases,the bond:

For a U.S resident,the best way to minimize exchange rate risk when investing in foreign stocks is to __________. ​

The current net income of Sigma Inc.is $8 million,market price of the stock is $65,and sales is $50 million? Which of the following is the net profit margin of Sigma Inc.?

Suppose the earnings per share of a stock is $2 and the current price/earnings (P/E)ratio is 10.What is the current price of the stock?

Bonds have higher returns when compared to stocks.

Earnings per share can be defined as the return earned on behalf of each share of common and preferred stock,calculated by dividing all earnings by the total number of shares outstanding.

A callable bond allows the issuer to retire the security prior to maturity.

A Puppy Pet Services $1,000 bond has a 7.5 percent coupon rate,matures in 2016,and is currently quoted at $820.The current yield is:

Which of the following statements about risk is correct?

In the stock market,the market cap of a large-cap stock is __________. ​

Bonds issued by political subdivisions of the U.S.government but not guaranteed by the government are called:

Understanding the Financial Planning Process

Using Financial Statements and Budgets

Preparing Your Taxes

Managing Your Cash and Savings

Making Automobile and Housing Decisions

Using Credit

Using Consumer Loans

Insuring Your Life

Insuring Your Health

Protecting Your Property

Investment Planning

Investing in Mutual Funds, ETFS and Real Estate

Planning for Retirement

Preserving Your Estate

Filters

For a U.S resident,the best way to minimize exchange rate risk when investing in foreign stocks is to __________.

In the stock market,the market cap of a large-cap stock is __________.