Question 1

Capital appreciation of an investment is a form of current income.

Accepted Answer

A) True 
 B)False  False

Question 2

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 C

Question 3

If the current price of an investment increases,what affect does the price increase have on approximate yield

Accepted Answer

A) moderately increase yield 
B) decrease yield 
C) will not affect the yield 
D) drastically increase yield 
E) none of the above 
A) moderately increase yield 
B) decrease yield 
C) will not affect the yield 
D) drastically increase yield 
E) none of the above B

Question 4

Which of the following statements about preferred stock is true?

Accepted Answer

A) Preferred shareholders generally get enhanced voting rights. 
B) Dividends must generally be paid to preferred shareholders before dividends may be paid to common shareholders. 
C) Preferred stocks are a hybrid between equity and debt, because like common stock the owners of preferred shares can vote and like debt they are paid interest. 
D) It would be foolish to purchase the common stock of a company that also issues preferred shares, because the preferred shares have a higher yield with a stronger guarantee. 
E) None of the above are true. 
A) Preferred shareholders generally get enhanced voting rights. 
B) Dividends must generally be paid to preferred shareholders before dividends may be paid to common shareholders. 
C) Preferred stocks are a hybrid between equity and debt, because like common stock the owners of preferred shares can vote and like debt they are paid interest. 
D) It would be foolish to purchase the common stock of a company that also issues preferred shares, because the preferred shares have a higher yield with a stronger guarantee. 
E) None of the above are true.

Question 5

Cash dividends on common stock are most often paid

Accepted Answer

A) weekly 
B) monthly 
C) quarterly 
D) semiannually 
E) annually 
A) weekly 
B) monthly 
C) quarterly 
D) semiannually 
E) annually

Question 6

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

Accepted Answer

A) True 
 B)False

Question 7

The higher the tax bracket you are in,the more attractive the purchase of municipal bonds becomes.

Accepted Answer

A) True 
 B)False

Question 8

Municipal bonds can be attractive investments,despite their lower interest rate,since their interest income is exempt from federal income tax.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is most likely to occur immediately following the announcement that the rating on a corporate bond has been lowered to junk status?

Accepted Answer

A) The yield-to-maturity on the bond will decline. 
B) The price of the bond will decline. 
C) The price of the bond will increase 
D) More than one of these 
E) None of these 
A) The yield-to-maturity on the bond will decline. 
B) The price of the bond will decline. 
C) The price of the bond will increase 
D) More than one of these 
E) None of these

Question 11

Bond return can include both interest and capital gains.

Accepted Answer

A) True 
 B)False

Question 12

The easiest way to invest in foreign stock is to purchase

Accepted Answer

A) the stock directly from an over sea's broker. 
B) the stock directly from your regular broker. 
C) the stock directly over the Internet. 
D) international mutual funds. 
E) American Depository Receipts. 
A) the stock directly from an over sea's broker. 
B) the stock directly from your regular broker. 
C) the stock directly over the Internet. 
D) international mutual funds. 
E) American Depository Receipts.

Question 13

Bond prices and market interest rates are ____ related.

Accepted Answer

A) inversely 
B) directly 
C) slightly 
D) positively 
E) none of the above 
A) inversely 
B) directly 
C) slightly 
D) positively 
E) none of the above

Question 14

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%,the taxable equivalent yield would be

Accepted Answer

A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%. 
A) 6.900%. 
B) 8.261%. 
C) 9.583%. 
D) 12.105%. 
E) 14.625%.

Question 15

Interest rate risk is greater for stocks than for bonds.

Accepted Answer

A) True 
 B)False

Question 16

Julie Johnson is in the 35 percent tax bracket.If she were to purchase a $1,000 municipal bond that had a stated interest rate of 6.5%,the fully taxable equivalent yield would be

Accepted Answer

A) 6.50%. 
B) 9.03%. 
C) 9.24%. 
D) 10.00%. 
E) 10.51%. 
A) 6.50%. 
B) 9.03%. 
C) 9.24%. 
D) 10.00%. 
E) 10.51%.

Question 17

Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.

Accepted Answer

A) True 
 B)False

Question 18

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement.
-Individuals invest in preferred stock for its high [current income | potential gain].

Accepted Answer

The answer of Choose the word or phrase in [...

Question 19

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement.
-One should look for companies with steadily [increasing | decreasing] book value per share.

Accepted Answer

The answer of Choose the word or phrase in [...

Question 20

An example of event risk would be

Accepted Answer

A) inflation. 
B) a corporate takeover. 
C) a newspaper article about the economy. 
D) earnings announcements. 
E) capital growth. 
A) inflation. 
B) a corporate takeover. 
C) a newspaper article about the economy. 
D) earnings announcements. 
E) capital growth.

Capital appreciation of an investment is a form of current income.

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

If the current price of an investment increases,what affect does the price increase have on approximate yield

Which of the following statements about preferred stock is true?

Cash dividends on common stock are most often paid

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

The higher the tax bracket you are in,the more attractive the purchase of municipal bonds becomes.

Municipal bonds can be attractive investments,despite their lower interest rate,since their interest income is exempt from federal income tax.

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

Which of the following is most likely to occur immediately following the announcement that the rating on a corporate bond has been lowered to junk status?

Bond return can include both interest and capital gains.

The easiest way to invest in foreign stock is to purchase

Bond prices and market interest rates are ____ related.

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%,the taxable equivalent yield would be

Interest rate risk is greater for stocks than for bonds.

Julie Johnson is in the 35 percent tax bracket.If she were to purchase a $1,000 municipal bond that had a stated interest rate of 6.5%,the fully taxable equivalent yield would be

Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -Individuals invest in preferred stock for its high [current income | potential gain].

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -One should look for companies with steadily [increasing | decreasing] book value per share.

An example of event risk would be

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

Capital appreciation of an investment is a form of current income.

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

If the current price of an investment increases,what affect does the price increase have on approximate yield

Which of the following statements about preferred stock is true?

Cash dividends on common stock are most often paid

Net profit margin is a key measure of profitability that relates the net profits of a firm to its sales.

The higher the tax bracket you are in,the more attractive the purchase of municipal bonds becomes.

Municipal bonds can be attractive investments,despite their lower interest rate,since their interest income is exempt from federal income tax.

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

Which of the following is most likely to occur immediately following the announcement that the rating on a corporate bond has been lowered to junk status?

Bond return can include both interest and capital gains.

The easiest way to invest in foreign stock is to purchase

Bond prices and market interest rates are ____ related.

John Smith is in the 28 percent tax bracket.If he were to purchase a $1,000 municipal bond that had a stated interest rate of 6.9%,the taxable equivalent yield would be

Interest rate risk is greater for stocks than for bonds.

Julie Johnson is in the 35 percent tax bracket.If she were to purchase a $1,000 municipal bond that had a stated interest rate of 6.5%,the fully taxable equivalent yield would be

Bonds can be used conservatively by investors seeking current income and aggressively by investors seeking capital gains.

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -Individuals invest in preferred stock for its high [current income | potential gain].

Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. -One should look for companies with steadily [increasing | decreasing] book value per share.

An example of event risk would be

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