Exam 12: Investing in Stocks and Bonds

Only the federal government issues zero coupon bonds.

A company's $1,000 bond has a 7.5% interest rate and is currently selling for $820.The current yield is

Which of the following types of risk affect owners of fixed income securities more than owners of equity securities

Preferred stockholders have no equity in the issuing firm.

Interest rate risk is greater for short-term bonds than for long-term bonds.

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. -ACE,Inc.has a market capitalization of $500 million.It would be classified as a [small-cap | mid-cap].

Convertible preferred stock can be exchanged for common stock.

Dividend income and stock appreciation represent the elements of total return for a stock investment.

All treasury bonds issued today are noncallable.

Treasury notes,bills,and bonds represent loans to the federal government.

The ____ of a stock reflects stockholder confidence.

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

Bonds rated AA by S&P and Aa by Moody's are considered very safe bonds.

TIPS are appropriate for investors who are conservative and concerned about inflation.

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. -[Bond | Common stock] prices would be most affected by interest rate risk.

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. -[Raising | Lowering] a bond rating will result in higher current yields.

The returns you expect from securities are income and growth.

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. -Dividends and earnings per share [refer | do not refer] to the same thing.

Market risk considers the possibility that the firm may fail.

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. -Tax on capital gains is paid [as the stock appreciates | in the year the stock is sold].