Question 1

You are considering an investment in a municipal bond that has a yield of 5%. Your tax rate is 25%. What is your taxable equivalent yield?

Accepted Answer

A)  0.75% 
B)  4.75% 
C)  5% 
D)  5.25% 
E)  6.67% 
A)  0.75% 
B)  4.75% 
C)  5% 
D)  5.25% 
E)  6.67%

Question 2

Patrick Guitman wants to protect himself against losses in his investments after the purchase. To do this, he should monitor the value of his investments to determine if he should hold, sell, or increase his stake in a specific investment.

Accepted Answer

A) True 
 B)False

Question 3

A debt security issued by a state or local government is known as a

Accepted Answer

A)  Treasury bond. 
B)  Municipal bond. 
C)  Corporate bond. 
D)  Subordinated bond. 
E)  Federal agency bond. 
A)  Treasury bond. 
B)  Municipal bond. 
C)  Corporate bond. 
D)  Subordinated bond. 
E)  Federal agency bond.

Question 4

Business failure risk

Accepted Answer

A)  Cannot be diversified. 
B)  Causes the business to increase its dividends. 
C)  In the worst case, leads to improved earnings. 
D)  Is associated with government bonds. 
E)  Causes the business to be less profitable than originally anticipated. 
A)  Cannot be diversified. 
B)  Causes the business to increase its dividends. 
C)  In the worst case, leads to improved earnings. 
D)  Is associated with government bonds. 
E)  Causes the business to be less profitable than originally anticipated.

Question 5

Which of the following investors would mostly prefer speculative investments with higher risks over conservative investments with less risk?

Accepted Answer

A)  A 25-year-old single investor who does not have an emergency fund 
B)  An unemployed single parent who just received a $300,000 divorce settlement 
C)  A 70-year-old who uses his dividends and interest to pay his monthly bills 
D)  A dual-career couple (with no children) in their 30s whose combined income is $95,000 
E)  A retired couple with $850,000 in retirement savings 
A)  A 25-year-old single investor who does not have an emergency fund 
B)  An unemployed single parent who just received a $300,000 divorce settlement 
C)  A 70-year-old who uses his dividends and interest to pay his monthly bills 
D)  A dual-career couple (with no children) in their 30s whose combined income is $95,000 
E)  A retired couple with $850,000 in retirement savings

Question 6

The process of spreading your assets among several different types of investments to lessen risk is called

Accepted Answer

A)  Asset allocation. 
B)  Asset combination. 
C)  Asset investments. 
D)  Asset riskiness. 
E)  Asset returns. 
A)  Asset allocation. 
B)  Asset combination. 
C)  Asset investments. 
D)  Asset riskiness. 
E)  Asset returns.

Question 7

The risk of fluctuations in the market prices of stocks or bonds relates only to fundamental changes in the financial health of corporations that issue these investments.

Accepted Answer

A) True 
 B)False

Question 8

If your primary investment objective is to receive investment income, which of the following would NOT be an appropriate investment for you?

Accepted Answer

A)  Utility stock 
B)  Corporate bond 
C)  Municipal bond 
D)  Preferred stock 
E)  Aggressive "Growth" funds 
A)  Utility stock 
B)  Corporate bond 
C)  Municipal bond 
D)  Preferred stock 
E)  Aggressive "Growth" funds

Question 9

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

Accepted Answer

A)  debenture 
B)  mortgage 
C)  indenture 
D)  preemptive 
E)  treasury 
A)  debenture 
B)  mortgage 
C)  indenture 
D)  preemptive 
E)  treasury

Question 10

According to some financial experts like Suze Orman, how much of an investment program should a 30-year-old have in growth investments?

Accepted Answer

A)  30% 
B)  65% 
C)  70% 
D)  80% 
E)  100% 
A)  30% 
B)  65% 
C)  70% 
D)  80% 
E)  100%

Question 11

Which of the following has returned an average of almost 10% per year since 1926?

Accepted Answer

A)  Bonds 
B)  Certificates of deposit 
C)  Conservative portfolio 
D)  Savings account 
E)  Stocks 
A)  Bonds 
B)  Certificates of deposit 
C)  Conservative portfolio 
D)  Savings account 
E)  Stocks

Question 12

What is the approximate market value of a bond that pays $60 interest each year if comparable interest rates have dropped to 5%?

Accepted Answer

A)  $100 
B)  $300 
C)  $500 
D)  $1,200 
E)  $2,400 
A)  $100 
B)  $300 
C)  $500 
D)  $1,200 
E)  $2,400

Question 13

Gwendolyn and Jack Francis are investors with no financial training or investment background. Which approach will they likely take?

Accepted Answer

A)  They will choose investments with higher risks. 
B)  Their choices of investments will not be affected by risk. 
C)  They will choose investments with less risk. 
D)  They will choose investments with no risk. 
E)  They will move all of their money into a savings account. 
A)  They will choose investments with higher risks. 
B)  Their choices of investments will not be affected by risk. 
C)  They will choose investments with less risk. 
D)  They will choose investments with no risk. 
E)  They will move all of their money into a savings account.

Question 14

As investors age, they tend to invest more in growth-oriented investments.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following steps should be completed before making your first investment?

Accepted Answer

A)  Pick out at least two stocks or bonds to invest in. 
B)  Work to balance your budget. 
C)  Save at least $10,000 to invest. 
D)  Invest in certificates of deposit. 
E)  These all are completed at the same time. 
A)  Pick out at least two stocks or bonds to invest in. 
B)  Work to balance your budget. 
C)  Save at least $10,000 to invest. 
D)  Invest in certificates of deposit. 
E)  These all are completed at the same time.

Question 16

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their investment plan. This percentage can be calculated by subtracting your age from

Accepted Answer

A)  50. 
B)  95. 
C)  100. 
D)  110. 
E)  200. 
A)  50. 
B)  95. 
C)  100. 
D)  110. 
E)  200.

Question 17

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Accepted Answer

A)  debenture 
B)  mortgage 
C)  indenture 
D)  preemptive 
E)  treasury 
A)  debenture 
B)  mortgage 
C)  indenture 
D)  preemptive 
E)  treasury

Question 18

Why do investors purchase corporate bonds?

Accepted Answer

A)  Interest income 
B)  Repayment at maturity 
C)  Possible increase in value 
D)  All of the above. 
E)  None of the above. 
A)  Interest income 
B)  Repayment at maturity 
C)  Possible increase in value 
D)  All of the above. 
E)  None of the above.

Question 19

Inflation risk deals with

Accepted Answer

A)  A reduction in purchasing power. 
B)  Changes in interest rates. 
C)  Bad management and/or unsuccessful products. 
D)  Political or social conditions. 
E)  Predictable sources of income. 
A)  A reduction in purchasing power. 
B)  Changes in interest rates. 
C)  Bad management and/or unsuccessful products. 
D)  Political or social conditions. 
E)  Predictable sources of income.

Question 20

Speculative investments include all of the following except

Accepted Answer

A)  Options. 
B)  Commodities. 
C)  Precious stones. 
D)  Savings accounts. 
E)  Precious metals. 
A)  Options. 
B)  Commodities. 
C)  Precious stones. 
D)  Savings accounts. 
E)  Precious metals.

You are considering an investment in a municipal bond that has a yield of 5%. Your tax rate is 25%. What is your taxable equivalent yield?

Patrick Guitman wants to protect himself against losses in his investments after the purchase. To do this, he should monitor the value of his investments to determine if he should hold, sell, or increase his stake in a specific investment.

A debt security issued by a state or local government is known as a

Business failure risk

Which of the following investors would mostly prefer speculative investments with higher risks over conservative investments with less risk?

The process of spreading your assets among several different types of investments to lessen risk is called

The risk of fluctuations in the market prices of stocks or bonds relates only to fundamental changes in the financial health of corporations that issue these investments.

If your primary investment objective is to receive investment income, which of the following would NOT be an appropriate investment for you?

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

According to some financial experts like Suze Orman, how much of an investment program should a 30-year-old have in growth investments?

Which of the following has returned an average of almost 10% per year since 1926?

What is the approximate market value of a bond that pays $60 interest each year if comparable interest rates have dropped to 5%?

Gwendolyn and Jack Francis are investors with no financial training or investment background. Which approach will they likely take?

As investors age, they tend to invest more in growth-oriented investments.

Which of the following steps should be completed before making your first investment?

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their investment plan. This percentage can be calculated by subtracting your age from

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Why do investors purchase corporate bonds?

Inflation risk deals with

Speculative investments include all of the following except

Personal Financial Planning in Action

Money Management Skills

Taxes in Your Financial Plan

Financial Services: Saving Plans and Payment Accounts

Consumer Credit: Advantages, Disadvantages, Sources, and Costs

Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Selecting and Financing Housing

Home and Automobile Insurance

Health and Disability Insurance

Financial Planning With Life Insurance

Investing in Stocks

Investing in Mutual Funds

Starting Early: Retirement and Estate Planning

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Exam 11: Investing Fundamentals and Bonds

You are considering an investment in a municipal bond that has a yield of 5%. Your tax rate is 25%. What is your taxable equivalent yield?

Patrick Guitman wants to protect himself against losses in his investments after the purchase. To do this, he should monitor the value of his investments to determine if he should hold, sell, or increase his stake in a specific investment.

A debt security issued by a state or local government is known as a

Business failure risk

Which of the following investors would mostly prefer speculative investments with higher risks over conservative investments with less risk?

The process of spreading your assets among several different types of investments to lessen risk is called

The risk of fluctuations in the market prices of stocks or bonds relates only to fundamental changes in the financial health of corporations that issue these investments.

If your primary investment objective is to receive investment income, which of the following would NOT be an appropriate investment for you?

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.

According to some financial experts like Suze Orman, how much of an investment program should a 30-year-old have in growth investments?

Which of the following has returned an average of almost 10% per year since 1926?

What is the approximate market value of a bond that pays $60 interest each year if comparable interest rates have dropped to 5%?

Gwendolyn and Jack Francis are investors with no financial training or investment background. Which approach will they likely take?

As investors age, they tend to invest more in growth-oriented investments.

Which of the following steps should be completed before making your first investment?

Some financial experts, such as Suze Orman, suggest that investors include a percentage of growth investments as part of their investment plan. This percentage can be calculated by subtracting your age from

A corporate bond that is secured by various assets of the issuing firm is called a(n) ____________ bond.

Why do investors purchase corporate bonds?

Inflation risk deals with

Speculative investments include all of the following except

Personal Financial Planning in Action

Money Management Skills

Taxes in Your Financial Plan

Financial Services: Saving Plans and Payment Accounts

Consumer Credit: Advantages, Disadvantages, Sources, and Costs

Consumer Purchasing Strategies and Wise Buying of Motor Vehicles

Selecting and Financing Housing

Home and Automobile Insurance

Health and Disability Insurance

Financial Planning With Life Insurance

Investing in Stocks

Investing in Mutual Funds

Starting Early: Retirement and Estate Planning

Filters