Exam 12: Investing in Stocks and 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. -[Raising | Lowering] a bond rating will result in higher current yields.

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. -Stocks of stable,older companies are called [earnings | blue-chip] stocks.

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. -You are looking for a relatively steady stream of income with some potential for growth; you should invest in [income stocks | growth stocks].

A bond is quoted as 6.5% coupon.The bondholder would receive _____ interest per year.

Treasury inflation-indexed bonds (TIPS)are appropriate for investors who are conservative and concerned about inflation.

The commonly-cited price for a bond in the financial press and on the Web is usually its clean bond price.

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. -If the value of the underlying stock dropped drastically,the owner of a convertible bond [would still receive $1,000 | would receive the market value of the stock] at maturity.

Bonds rated AA by S&P and Aa by Moody's would be investment quality.

Interest rate risk is greater for long-term bonds than for short-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. -The commonly-cited price for a bond in the financial press and on the Web is usually its [clean | dirty] bond price.

Which of the following would be a disadvantage of owning an income stock?

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. -[General obligation bonds | Revenue bonds] are the least risky municipal bond category.

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. -Municipal bonds are exempt from [income tax | capital gains tax].

Income stocks are similar to bonds in that they pay annual interest to owners.

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.

Common stock owners must receive dividends before preferred stockholders.

You received a cash dividend from your stock investment this year.This is taxable income.

The returns you would expect from your investments could be:

Corporate ownership is evidenced by:

Junk bonds have higher risk and similar returns to investment grade bonds.