Exam 12: Investing in Stocks

A buy-and-hold investment strategy means that an investor's gains will be taxed as short-term capital gains.

Which stock index will have the largest representation of small-,mid- and large -cap stocks?

The acronym DRIP stands for

According to the risk-return relationship,commercial paper usually has a higher risk and return than long-term corporate bonds.

The discounted dividends valuation model of common stock assumes that dividends will grow at a constant rate forever.This method tells us that the (dividend next year)divided by the (required rate of return - growth rate)yields the

A growth stock is known for its high dividend yields.

Compare and contrast the Dow Jones Industrial Average and Standard & Poor's 500-Stock Index.

The P/E ratio of a stock is 20,and its earnings per share is $5.25.What is the current selling price of the stock?

Why is using the P/E ratio a very popular valuation tool?

Because the Dow Jones Index Average is based on the movement of 500 large,well-established stocks,many investors believe it reflects price movements for large firms rather than for the general market.

What would you expect to be associated with a company whose stock has a high beta?

Beta is the measure of how responsive a stock is to changes in the market portfolios,like the S&P 500.

The P/E ratio approach is a type of fundamental analysis.

Movement in the stock market indexes determines whether it is a bear or bull market.

The letters or characters that represent a stock is known as the stock's

Technical analysis is a stock valuation technique that incorporates expected future earnings of the company,the riskiness of the companies cash flows,and interest rates in the markets in determining the current value of the stock.

Figure 13.1 in your textbook compares the returns on various investments over the period 1951-2010.Which of the following is shown to exceed the inflation rate by the widest margin?

You own 1,000 shares of Amazon,whose value just hit $1,500 per share.Amazon decides to do a three for one split.you now own?

During a "bear market" stocks prices typically fall.

When investors talk about movements in the market,they generally refer to the Russell 1000.