Question 1

A corporate bond is a written pledge of a government or a municipality to repay a specified sum of money, along with interest.

Accepted Answer

A) True 
 B)False

Question 2

With business failure risk, you face the possibility that good management and successful products will cause the business to be less profitable than originally anticipated.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A)  Convertible corporate bonds are more secure than government bonds. 
B)  Convertible bonds often pay 1-2% more interest than nonconvertible bonds. 
C)  Because of the conversion feature, it is not necessary to evaluate convertible corporate bonds. 
D)  Investors enjoy the lower risk of a corporate bond but also take advantage of the speculative nature of common stock. 
E)  Even after convertible bondholders convert their investments to common stock, the bondholders still receive interest payments. 
A)  Convertible corporate bonds are more secure than government bonds. 
B)  Convertible bonds often pay 1-2% more interest than nonconvertible bonds. 
C)  Because of the conversion feature, it is not necessary to evaluate convertible corporate bonds. 
D)  Investors enjoy the lower risk of a corporate bond but also take advantage of the speculative nature of common stock. 
E)  Even after convertible bondholders convert their investments to common stock, the bondholders still receive interest payments.

Question 4

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

Accepted Answer

A)  Treasury bill. 
B)  Savings bond. 
C)  Revenue bond. 
D)  General obligation bond. 
E)  Agency bond. 
A)  Treasury bill. 
B)  Savings bond. 
C)  Revenue bond. 
D)  General obligation bond. 
E)  Agency bond.

Question 5

The potential return on any investment should be directly related to the risk that the investor assumes.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A)  A 25-year-old single investor with no children with a job that pays $60,000 per year 
B)  An unemployed single parent who just received a $300,000 divorce settlement 
C)  A 30-year-old who in independently wealthy and has a separate trust fund for day-to-day expenses 
D)  A dual-career couple in their 30s with secure jobs whose combined income is $95,000 
E)  A healthy 45-year-old who plans to work in his secure job for at least 25 more years 
A)  A 25-year-old single investor with no children with a job that pays $60,000 per year 
B)  An unemployed single parent who just received a $300,000 divorce settlement 
C)  A 30-year-old who in independently wealthy and has a separate trust fund for day-to-day expenses 
D)  A dual-career couple in their 30s with secure jobs whose combined income is $95,000 
E)  A healthy 45-year-old who plans to work in his secure job for at least 25 more years

Question 7

If you need access to your funds in two years or less, which of the following investments would be least appropriate?

Accepted Answer

A)  Cash 
B)  Certificates of deposit 
C)  Short-term government bonds 
D)  Highly rated corporate bonds 
E)  Stocks and mutual funds 
A)  Cash 
B)  Certificates of deposit 
C)  Short-term government bonds 
D)  Highly rated corporate bonds 
E)  Stocks and mutual funds

Question 8

A valid short-term investment goal is

Accepted Answer

A)  Saving $4,000 per year for retirement. 
B)  Spending less than $500 per month for housing. 
C)  Accumulating $3,000 in a savings account over the next 12 months. 
D)  Using credit cards less in the next six months. 
E)  Purchasing a $250,000 life insurance policy within the next four years. 
A)  Saving $4,000 per year for retirement. 
B)  Spending less than $500 per month for housing. 
C)  Accumulating $3,000 in a savings account over the next 12 months. 
D)  Using credit cards less in the next six months. 
E)  Purchasing a $250,000 life insurance policy within the next four years.

Question 9

After you purchase an investment, you should

Accepted Answer

A)  Assume that your investment is tax-free. 
B)  Continually evaluate your investment. 
C)  Ignore other potential investments. 
D)  Leave recordkeeping to the financial adviser. 
E)  Let the investment manage itself. 
A)  Assume that your investment is tax-free. 
B)  Continually evaluate your investment. 
C)  Ignore other potential investments. 
D)  Leave recordkeeping to the financial adviser. 
E)  Let the investment manage itself.

Question 10

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

Accepted Answer

A)  Subordinated bond. 
B)  Treasury bill. 
C)  Treasury note. 
D)  Treasury bond. 
E)  Savings bond. 
A)  Subordinated bond. 
B)  Treasury bill. 
C)  Treasury note. 
D)  Treasury bond. 
E)  Savings bond.

Question 11

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.

Accepted Answer

A) True 
 B)False

Question 12

If your main focus is to have your investments increase in value, you are most concerned with

Accepted Answer

A)  Income. 
B)  Growth. 
C)  Liquidity. 
D)  Business failure risk. 
E)  Market risk. 
A)  Income. 
B)  Growth. 
C)  Liquidity. 
D)  Business failure risk. 
E)  Market risk.

Question 13

Younger investors tend to invest in more growth-oriented investments, because they do not have time to recover if their investments take a nosedive.

Accepted Answer

A) True 
 B)False

Question 14

Investment goals are always oriented to the future.

Accepted Answer

A) True 
 B)False

Question 15

When comparing the interest rates for U.S. government securities, which of the following is correct?

Accepted Answer

A)  Treasury bonds < Treasury bills < Treasury notes 
B)  Treasury bills < Treasury notes < Treasury bonds 
C)  Treasury notes < Treasury bills < Treasury bonds 
D)  Treasury bills < Treasury bonds < Treasury notes 
E)  Treasury bonds < Treasury notes < Treasury bills 
A)  Treasury bonds < Treasury bills < Treasury notes 
B)  Treasury bills < Treasury notes < Treasury bonds 
C)  Treasury notes < Treasury bills < Treasury bonds 
D)  Treasury bills < Treasury bonds < Treasury notes 
E)  Treasury bonds < Treasury notes < Treasury bills

Question 16

Which of the following would be considered a safe investment?

Accepted Answer

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

Question 17

Which of the following investments typically has the most risk?

Accepted Answer

A)  Government bonds 
B)  Cash 
C)  Cash equivalents 
D)  Certificates of deposit 
E)  Stocks 
A)  Government bonds 
B)  Cash 
C)  Cash equivalents 
D)  Certificates of deposit 
E)  Stocks

Question 18

Investments that earn a lower rate of interest will have a higher total dollar return than those that earn a high rate of interest.

Accepted Answer

A) True 
 B)False

Question 19

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80.

Accepted Answer

A) True 
 B)False

Question 20

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer investments with less risk.

Accepted Answer

A) True 
 B)False

A corporate bond is a written pledge of a government or a municipality to repay a specified sum of money, along with interest.

With business failure risk, you face the possibility that good management and successful products will cause the business to be less profitable than originally anticipated.

Which of the following statements is true?

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

The potential return on any investment should be directly related to the risk that the investor assumes.

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

If you need access to your funds in two years or less, which of the following investments would be least appropriate?

A valid short-term investment goal is

After you purchase an investment, you should

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.

If your main focus is to have your investments increase in value, you are most concerned with

Younger investors tend to invest in more growth-oriented investments, because they do not have time to recover if their investments take a nosedive.

Investment goals are always oriented to the future.

When comparing the interest rates for U.S. government securities, which of the following is correct?

Which of the following would be considered a safe investment?

Which of the following investments typically has the most risk?

Investments that earn a lower rate of interest will have a higher total dollar return than those that earn a high rate of interest.

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80.

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer investments with less risk.

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

A corporate bond is a written pledge of a government or a municipality to repay a specified sum of money, along with interest.

With business failure risk, you face the possibility that good management and successful products will cause the business to be less profitable than originally anticipated.

Which of the following statements is true?

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

The potential return on any investment should be directly related to the risk that the investor assumes.

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

If you need access to your funds in two years or less, which of the following investments would be least appropriate?

A valid short-term investment goal is

After you purchase an investment, you should

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.

If your main focus is to have your investments increase in value, you are most concerned with

Younger investors tend to invest in more growth-oriented investments, because they do not have time to recover if their investments take a nosedive.

Investment goals are always oriented to the future.

When comparing the interest rates for U.S. government securities, which of the following is correct?

Which of the following would be considered a safe investment?

Which of the following investments typically has the most risk?

Investments that earn a lower rate of interest will have a higher total dollar return than those that earn a high rate of interest.

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80.

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer investments with less risk.

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