Question 1

Of the following statements about a day trader,which is not correct?

Accepted Answer

A)  They have a short-term focus. 
B)  They may buy and sell on the same day. 
C)  They are more risk averse than most investors. 
D)  Day trading may be their career. 
A)  They have a short-term focus. 
B)  They may buy and sell on the same day. 
C)  They are more risk averse than most investors. 
D)  Day trading may be their career.

Question 2

Before you start an investment program,you should ensure liquidity by having money in financial institutions or in money market securities.

Accepted Answer

A) True 
 B)False

Question 3

The return you will earn on certain stocks and bonds is uncertain because specific prices are not guaranteed.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not true regarding mutual funds?

Accepted Answer

A)  There are thousands of funds with many different investing objectives. 
B)  They offer small investors diversification and professional management. 
C)  Dividends received from their investments are used to pay operational expenses, and capital gains are passed on to the mutual fund shareowners. 
D)  Both dividends and gains are distributed to mutual fund shareowners. 
A)  There are thousands of funds with many different investing objectives. 
B)  They offer small investors diversification and professional management. 
C)  Dividends received from their investments are used to pay operational expenses, and capital gains are passed on to the mutual fund shareowners. 
D)  Both dividends and gains are distributed to mutual fund shareowners.

Question 5

________ investors are professionals employed by a financial institution and are responsible for managing money.

Accepted Answer

A)  Institutional 
B)  Professional 
C)  Managing 
D)  Security 
A)  Institutional 
B)  Professional 
C)  Managing 
D)  Security

Question 6

The security that represents equity or ownership of a corporation is

Accepted Answer

A)  common stock. 
B)  corporate bonds. 
C)  long-term loans. 
D)  commercial paper. 
A)  common stock. 
B)  corporate bonds. 
C)  long-term loans. 
D)  commercial paper.

Question 7

The time value of money concepts do not include

Accepted Answer

A)  interest or the cost of money. 
B)  payments of principal and interest. 
C)  present and future values. 
D)  the risks associated with various investments. 
A)  interest or the cost of money. 
B)  payments of principal and interest. 
C)  present and future values. 
D)  the risks associated with various investments.

Question 8

It is December 10th and you have a stock that you purchased last January 5th,which has increased in value by more than $3,000.You think the stock will not significantly increase or decrease in value over the next month or so,and you would like to take your gain.What should you do?

Accepted Answer

A)  Sell the stock today and take the gain. 
B)  Wait until December 30th and sell the stock then. 
C)  Sell the stock on January 6th of next year or later. 
D)  Do not sell the stock until it starts to go down in value. 
A)  Sell the stock today and take the gain. 
B)  Wait until December 30th and sell the stock then. 
C)  Sell the stock on January 6th of next year or later. 
D)  Do not sell the stock until it starts to go down in value.

Question 9

Most investors are fully aware of the risk involved when pursuing investments that have the potential for very large returns.

Accepted Answer

A) True 
 B)False

Question 10

Common stockholders usually have more dividend rights than preferred stockholders.

Accepted Answer

A) True 
 B)False

Question 11

It is December 30th and you have stock in Zero Corporation that you bought on March 1st that has increased $2,000 in value.You are thinking of selling the stock.From a tax standpoint,what should you do with the Zero stock?

Accepted Answer

A)  Sell it today. 
B)  Sell it on January 2nd of next year. 
C)  Wait until after March 1st of next year and sell it then. 
D)  Sell half the stock today and the rest on January 2. 
A)  Sell it today. 
B)  Sell it on January 2nd of next year. 
C)  Wait until after March 1st of next year and sell it then. 
D)  Sell half the stock today and the rest on January 2.

Question 12

Which of the following statements is true with regard to the risk of investments?

Accepted Answer

A)  There is very little risk in an IPO since returns often exceed 20% in the first day. 
B)  Mutual funds containing mostly large stocks are more risky than mutual funds containing smaller stocks. 
C)  If you prefer less risk, purchase a bond issued by a successful and established firm. 
D)  There is little risk in purchasing land as an investment since the value of land always appreciates over time. 
A)  There is very little risk in an IPO since returns often exceed 20% in the first day. 
B)  Mutual funds containing mostly large stocks are more risky than mutual funds containing smaller stocks. 
C)  If you prefer less risk, purchase a bond issued by a successful and established firm. 
D)  There is little risk in purchasing land as an investment since the value of land always appreciates over time.

Question 13

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

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 14

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

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 15

Because dividends are fixed,the prices of preferred stock are not as volatile as those of common stock.

Accepted Answer

A) True 
 B)False

Question 16

To earn the highest possible return in the stock market,you will need to

Accepted Answer

A)  invest in the most well known stocks. 
B)  diversify your portfolio. 
C)  accept a high level of risk. 
D)  buy only the stocks of large, international firms. 
A)  invest in the most well known stocks. 
B)  diversify your portfolio. 
C)  accept a high level of risk. 
D)  buy only the stocks of large, international firms.

Question 17

Of the following,which is not used in measuring a stock's return?

Accepted Answer

A)  Price of the stock at the time of purchase 
B)  Average price of the stock during the period owned 
C)  Price of the stock at the time of sale 
D)  Dividends earned during the period owned 
A)  Price of the stock at the time of purchase 
B)  Average price of the stock during the period owned 
C)  Price of the stock at the time of sale 
D)  Dividends earned during the period owned

Question 18

Which of the following statements regarding an investment's risk is not true?

Accepted Answer

A)  Investors measure risk to determine the degree of uncertainty surrounding their future returns. 
B)  Risky stock will have a smaller range of returns and a smaller standard deviation of returns. 
C)  Investments with a wide range of returns have more risk. 
D)  Standard deviation measures the degree of volatility in the stock's return over time. 
A)  Investors measure risk to determine the degree of uncertainty surrounding their future returns. 
B)  Risky stock will have a smaller range of returns and a smaller standard deviation of returns. 
C)  Investments with a wide range of returns have more risk. 
D)  Standard deviation measures the degree of volatility in the stock's return over time.

Question 19

All of the following are true about IPO's,except

Accepted Answer

A)  an IPO is the first time a firm's shares are listed on a stock exchange and publically traded. 
B)  an IPO is the first time a firm sells shares to investors. 
C)  after the IPO, shares begin trading on the secondary market. 
D)  All of the statements are true about IPO's. 
A)  an IPO is the first time a firm's shares are listed on a stock exchange and publically traded. 
B)  an IPO is the first time a firm sells shares to investors. 
C)  after the IPO, shares begin trading on the secondary market. 
D)  All of the statements are true about IPO's.

Question 20

It would be very difficult and expensive for an individual investor to benefit from holding all 500 stocks of the Standard and Poor's 500 Index.

Accepted Answer

A) True 
 B)False

Exam 14: Investing Fundamentals

Of the following statements about a day trader,which is not correct?

Before you start an investment program,you should ensure liquidity by having money in financial institutions or in money market securities.

The return you will earn on certain stocks and bonds is uncertain because specific prices are not guaranteed.

Which of the following is not true regarding mutual funds?

________ investors are professionals employed by a financial institution and are responsible for managing money.

The security that represents equity or ownership of a corporation is

The time value of money concepts do not include

It is December 10th and you have a stock that you purchased last January 5th,which has increased in value by more than $3,000.You think the stock will not significantly increase or decrease in value over the next month or so,and you would like to take your gain.What should you do?

Most investors are fully aware of the risk involved when pursuing investments that have the potential for very large returns.

Common stockholders usually have more dividend rights than preferred stockholders.

It is December 30th and you have stock in Zero Corporation that you bought on March 1st that has increased $2,000 in value.You are thinking of selling the stock.From a tax standpoint,what should you do with the Zero stock?

Which of the following statements is true with regard to the risk of investments?

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

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

Because dividends are fixed,the prices of preferred stock are not as volatile as those of common stock.

To earn the highest possible return in the stock market,you will need to

Of the following,which is not used in measuring a stock's return?

Which of the following statements regarding an investment's risk is not true?

All of the following are true about IPO's,except

It would be very difficult and expensive for an individual investor to benefit from holding all 500 stocks of the Standard and Poor's 500 Index.

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