Exam 12: Investing in Stocks and Bonds

Stocks with betas of less than 1.0 will have relatively stable prices.

A stock's beta is an indication of how responsive the stock is to changes in the overall stock market.

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. -The possibility that a corporation might fail is [economic | business] risk.

Growth stocks generally pay little or nothing in dividends.

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. -[Market | Business] risk results from the behavior of investors that may cause security prices to fluctuate.

A company with low financial risk has little to no long-term debt.

Calculate the approximate yield on the common stock of Bowl Game that Matty Smelt has owned for 4 years.She bought it for $10 per share and sold it for $25.The dividend was $1.50 each year.(Show all work.)

Bondholders have no equity in the issuing firm.

Dividend reinvestment plans provide shareholders with cash so that they can invest in similar stocks.

There is an inverse relationship between bond prices and market interest rates.

If Wristwatch Arm Corporation (WAC)has assets of $10 million,liabilities of $5 million,and preferred stock of $1 million,its book value is $6 million.

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. -Most publicly traded stocks represent [a liquid | an illiquid] investment.

Price fluctuations of defensive stocks are usually contrary to movements in the business cycle.

When market interest rates rise,bond prices will

Investors typically welcome their bonds being called because of the generous call premium paid.

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. -A cyclical stock's price would tend to move in the [same | opposite] direction as the entire market.

Stocks with price movements that tend to follow the business cycle are called

The value of any investment is a function of the return it is expected to produce relative to the amount of perceived risk involved in the investment.

Bondholders will receive interest payments only after stockholders receive dividends.

Common stock owners must receive dividends before preferred stockholders.