Question 1

Publicly traded indexes are typically purchased by investors who expect an increase in

Accepted Answer

A)  an inflation index. 
B)  an unemployment index. 
C)  an index representing the political approval rating of the president of the United States. 
D)  a particular stock index. 
A)  an inflation index. 
B)  an unemployment index. 
C)  an index representing the political approval rating of the president of the United States. 
D)  a particular stock index. D

Question 2

If you wish to have a direct voice in the running of a company,you should purchase

Accepted Answer

A)  bonds. 
B)  notes. 
C)  common stock. 
D)  preferred stock. 
A)  bonds. 
B)  notes. 
C)  common stock. 
D)  preferred stock. C

Question 3

Use the following two columns of items to answer the matching questions below:
-stock exchanges

Accepted Answer

A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors 
A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors G

Question 4

Describe common stock.

Accepted Answer

Common stock has no guaranteed value and

Question 5

Mutual fund gains can be in the form of dividends or capital gains,which are passed on to the individual investors.

Accepted Answer

A) True 
 B)False

Question 6

To measure an investment's risk,you may use all of the following except

Accepted Answer

A)  time value of money. 
B)  range of returns. 
C)  standard deviation of returns. 
D)  subjective measures of risk. 
A)  time value of money. 
B)  range of returns. 
C)  standard deviation of returns. 
D)  subjective measures of risk.

Question 7

Use the following two columns of items to answer the matching questions below:
-IPO

Accepted Answer

A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors 
A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors

Question 8

Present and future value concepts are used to determine the wealth provided by an investment.

Accepted Answer

A) True 
 B)False

Question 9

All of the following gains from investments are taxed as ordinary income except

Accepted Answer

A)  coupon payments. 
B)  interest. 
C)  short-term capital gains. 
D)  long-term capital gains. 
A)  coupon payments. 
B)  interest. 
C)  short-term capital gains. 
D)  long-term capital gains.

Question 10

If you have $5,000 to invest but will need to use the funds in three years to buy a home,you should

Accepted Answer

A)  invest in a diversified stock mutual fund. 
B)  buy stocks of relatively stable firms that have low risk. 
C)  buy a three-year CD. 
D)  put the money in a money market savings account. 
A)  invest in a diversified stock mutual fund. 
B)  buy stocks of relatively stable firms that have low risk. 
C)  buy a three-year CD. 
D)  put the money in a money market savings account.

Question 11

If you purchase 100 shares of Ajax Corporation for $15 a share and one year later sell it for $20 a share,what was your return if the stock paid $2 per share dividends? (Ignore commissions and trading fees.Round to the nearest whole percent.)

Accepted Answer

A)  10% 
B)  33% 
C)  47% 
D)  40% 
A)  10% 
B)  33% 
C)  47% 
D)  40%

Question 12

What would you pay for a stock whose price you estimate will be $50 in 10 years and you wish to earn a return on the investment of 9% per year? Ignore brokerage commissions and tax implications and assume the stock pays no dividends during the holding period.

Accepted Answer

A)  $45 
B)  $41 
C)  $21.10 
D)  $15 
A)  $45 
B)  $41 
C)  $21.10 
D)  $15

Question 13

Day traders always trade

Accepted Answer

A)  in the primary market. 
B)  in either the primary or secondary markets. 
C)  with an objective of buying and selling within two hours. 
D)  using margin funding. 
A)  in the primary market. 
B)  in either the primary or secondary markets. 
C)  with an objective of buying and selling within two hours. 
D)  using margin funding.

Question 14

When a firm performs well,investors holding its shares are ________ willing to sell them and therefore,the demand for the stock ________.

Accepted Answer

A)  more; increases 
B)  less; decreases 
C)  less; increases 
D)  more; decreases 
A)  more; increases 
B)  less; decreases 
C)  less; increases 
D)  more; decreases

Question 15

A stock's ________ is a measure of the degree of volatility in a stock's returns over time.

Accepted Answer

A)  range of returns 
B)  standard deviation 
C)  beta 
D)  value 
A)  range of returns 
B)  standard deviation 
C)  beta 
D)  value

Question 16

It is easy to predict the level of demand for certain investments since future economic conditions are fairly measurable.

Accepted Answer

A) True 
 B)False

Question 17

All of the following are true statements about common stock dividends except

Accepted Answer

A)  dividends are based upon earnings. 
B)  no dividends may be paid. 
C)  dividends are usually between 1% and 3% of the stock's price. 
D)  dividends are contractually guaranteed to common stockholders. 
A)  dividends are based upon earnings. 
B)  no dividends may be paid. 
C)  dividends are usually between 1% and 3% of the stock's price. 
D)  dividends are contractually guaranteed to common stockholders.

Question 18

Use the following two columns of items to answer the matching questions below:
-bonds

Accepted Answer

A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors 
A) first offering of a firm's stock to the public 
B) financial instruments that represent partial ownership of a firm 
C) investors owning this type of stock have priority over common stockholders in receiving dividends 
D) individual investors who buy and sell stocks within a day 
E) market where existing securities are sold
F)professionals responsible for clients' funds
G)facilities that allow investors to purchase or sell existing stocks
H)debt instruments issued by the government or corporations to borrow money from investors

Question 19

Examples of common investment mistakes covered in the text include all of the following except

Accepted Answer

A)  following the advice of a stockbroker. 
B)  making decisions based on unrealistic goals. 
C)  borrowing to invest. 
D)  taking risks to recover losses from previous investments. 
A)  following the advice of a stockbroker. 
B)  making decisions based on unrealistic goals. 
C)  borrowing to invest. 
D)  taking risks to recover losses from previous investments.

Question 20

Which of the following investments would you not consider if you have adequate liquidity and additional funds to invest?

Accepted Answer

A)  Real estate 
B)  Preferred stock 
C)  Mutual funds 
D)  Money market securities 
A)  Real estate 
B)  Preferred stock 
C)  Mutual funds 
D)  Money market securities

Exam 14: Investing Fundamentals

Publicly traded indexes are typically purchased by investors who expect an increase in

If you wish to have a direct voice in the running of a company,you should purchase

Use the following two columns of items to answer the matching questions below: -stock exchanges

Describe common stock.

Mutual fund gains can be in the form of dividends or capital gains,which are passed on to the individual investors.

To measure an investment's risk,you may use all of the following except

Use the following two columns of items to answer the matching questions below: -IPO

Present and future value concepts are used to determine the wealth provided by an investment.

All of the following gains from investments are taxed as ordinary income except

If you have $5,000 to invest but will need to use the funds in three years to buy a home,you should

If you purchase 100 shares of Ajax Corporation for $15 a share and one year later sell it for $20 a share,what was your return if the stock paid $2 per share dividends? (Ignore commissions and trading fees.Round to the nearest whole percent.)

What would you pay for a stock whose price you estimate will be $50 in 10 years and you wish to earn a return on the investment of 9% per year? Ignore brokerage commissions and tax implications and assume the stock pays no dividends during the holding period.

Day traders always trade

When a firm performs well,investors holding its shares are ________ willing to sell them and therefore,the demand for the stock ________.

A stock's ________ is a measure of the degree of volatility in a stock's returns over time.

It is easy to predict the level of demand for certain investments since future economic conditions are fairly measurable.

All of the following are true statements about common stock dividends except

Use the following two columns of items to answer the matching questions below: -bonds

Examples of common investment mistakes covered in the text include all of the following except

Which of the following investments would you not consider if you have adequate liquidity and additional funds to invest?

Overview of a Financial Plan

Planning With Personal Financial Statements

Applying Time Value Concepts

Using Tax Concepts for Planning

Banking and Interest Rates

Managing Your Money

Assessing and Securing Your Credit

Managing Your Credit

Personal Loans

Purchasing and Financing a Home

Auto and Homeowners Insurance

Health and Disability Insurance

Life Insurance

Investing in Stocks

Investing in Bonds

Investing in Mutual Funds

Asset Allocation

Retirement Planning

Estate Planning

Integrating the Components of a Financial Plan

Filters

When a firm performs well,investors holding its shares are willing to sell them and therefore,the demand for the stock .