Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following are characteristic of Treasury inflation-indexed bonds?

Accepted Answer

A)  They are short-term securities issued by the federal government. 
B)  The interest paid is indexed for inflation. 
C)  The face value of the bond is indexed for inflation 
D)  The value of the bond could fall below the face value. 
E)  b and c 
A)  They are short-term securities issued by the federal government. 
B)  The interest paid is indexed for inflation. 
C)  The face value of the bond is indexed for inflation 
D)  The value of the bond could fall below the face value. 
E)  b and c

Question 3

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Dividends and earnings per share [refer | do not refer] to the same thing.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 4

A high inflation rate would result in a high degree of

Accepted Answer

A)  business risk. 
B)  financial risk. 
C)  market risk. 
D)  purchasing power risk. 
E)  interest rate risk. 
A)  business risk. 
B)  financial risk. 
C)  market risk. 
D)  purchasing power risk. 
E)  interest rate risk.

Question 5

Which of the following bond ratings would be for junk bonds?

Accepted Answer

A)  BBB 
B)  A 
C)  BB 
D)  AAA 
E)  AA 
A)  BBB 
B)  A 
C)  BB 
D)  AAA 
E)  AA

Question 6

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-A potential high return on an investment will signal a [high | low] risk exposure.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 7

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose?

Accepted Answer

Yield on corporate bond = 8.5%

Question 8

Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.

Accepted Answer

A) True 
 B)False

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 10

The approximate yield-to-maturity of a bond is greater than the stated rate of interest when

Accepted Answer

A)  purchased at face value. 
B)  purchased at discount. 
C)  purchased at premium. 
D)  market rates of interest decline. 
E)  market rates of interest are constant. 
A)  purchased at face value. 
B)  purchased at discount. 
C)  purchased at premium. 
D)  market rates of interest decline. 
E)  market rates of interest are constant.

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Individuals invest in preferred stock for its high [current income | potential gain].

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 12

A lower expected return will mean a higher risk will have to be accepted.

Accepted Answer

A) True 
 B)False

Question 13

Companies with a great deal of long-term debt would rate fairly high in ____ risk.

Accepted Answer

A)  market 
B)  event 
C)  business 
D)  financial 
E)  liquidity 
A)  market 
B)  event 
C)  business 
D)  financial 
E)  liquidity

Question 14

Bonds are issued by

Accepted Answer

A)  corporations,state and local and federal governments. 
B)  state and local governments and partnerships. 
C)  corporations and partnerships. 
D)  Moodys and Standard and Poor's. 
E)  none of these. 
A)  corporations,state and local and federal governments. 
B)  state and local governments and partnerships. 
C)  corporations and partnerships. 
D)  Moodys and Standard and Poor's. 
E)  none of these.

Question 15

Stocks with high betas will have larger price gains and losses than those with low betas.

Accepted Answer

A) True 
 B)False

Question 16

The returns you expect from securities are income and growth.

Accepted Answer

A) True 
 B)False

Question 17

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-ACE,Inc.has a market capitalization of $500 million.It would be classified as a [small-cap | mid-cap].

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

Question 18

Stocks with high betas will have larger price gains but lower price declines than those with low betas.

Accepted Answer

A) True 
 B)False

Question 19

Only the strongest,most stable and safe-return companies can be called

Accepted Answer

A)  blue chip stocks. 
B)  growth companies. 
C)  income stocks. 
D)  defensive stocks. 
E)  cyclical stocks. 
A)  blue chip stocks. 
B)  growth companies. 
C)  income stocks. 
D)  defensive stocks. 
E)  cyclical stocks.

Question 20

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Past returns on an investment are [an indication | a guarantee] of future returns.

Accepted Answer

A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement. 
A) for the first item 
B) for the second item 
C) if neither item will correctly complete the statement.

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

Which of the following are characteristic of Treasury inflation-indexed bonds?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Dividends and earnings per share [refer | do not refer] to the same thing.

A high inflation rate would result in a high degree of

Which of the following bond ratings would be for junk bonds?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -A potential high return on an investment will signal a [high | low] risk exposure.

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose?

Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

The approximate yield-to-maturity of a bond is greater than the stated rate of interest when

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Individuals invest in preferred stock for its high [current income | potential gain].

A lower expected return will mean a higher risk will have to be accepted.

Companies with a great deal of long-term debt would rate fairly high in ____ risk.

Bonds are issued by

Stocks with high betas will have larger price gains and losses than those with low betas.

The returns you expect from securities are income and growth.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -ACE,Inc.has a market capitalization of $500 million.It would be classified as a [small-cap | mid-cap].

Stocks with high betas will have larger price gains but lower price declines than those with low betas.

Only the strongest,most stable and safe-return companies can be called

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Past returns on an investment are [an indication | a guarantee] of future returns.

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

Planning for Retirement

Preserving Your Estate

Filters

Exam 12: Investing in Stocks and Bonds

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

Which of the following are characteristic of Treasury inflation-indexed bonds?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Dividends and earnings per share [refer | do not refer] to the same thing.

A high inflation rate would result in a high degree of

Which of the following bond ratings would be for junk bonds?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -A potential high return on an investment will signal a [high | low] risk exposure.

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose?

Event risk occurs when something substantial happens to a company that has an immediate impact on its financial condition.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

The approximate yield-to-maturity of a bond is greater than the stated rate of interest when

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Individuals invest in preferred stock for its high [current income | potential gain].

A lower expected return will mean a higher risk will have to be accepted.

Companies with a great deal of long-term debt would rate fairly high in ____ risk.

Bonds are issued by

Stocks with high betas will have larger price gains and losses than those with low betas.

The returns you expect from securities are income and growth.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -ACE,Inc.has a market capitalization of $500 million.It would be classified as a [small-cap | mid-cap].

Stocks with high betas will have larger price gains but lower price declines than those with low betas.

Only the strongest,most stable and safe-return companies can be called

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Past returns on an investment are [an indication | a guarantee] of future returns.

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

Planning for Retirement

Preserving Your Estate

Filters