Exam 11: Investment Basics

The primary sources of information about the stock market and individual stocks are Moody's Investors Service,Standard & Poor's Stock Reports,Morningstar Investment Reports,and the Value Line Investment Survey.

The difference between an organized exchange and an over-the-counter market is that the transactions that occur on an organized exchange ________ and the over-the-counter transactions ________.

A company that doesn't make a dividend payment is insolvent and may be forced into bankruptcy by the stockholders.

When a stock price reflects all relevant information about the stock,the market is said to be

A typical young investor should have most of their retirement money allocated in common stocks.

If you purchase some shares of stock

Why is speculating in derivatives,futures contracts and options not appropriate for the typical,long-term investor?

The concept of asset allocation has nothing to do with the time dimension of investing.

You have been watching a stock that has dramatically increased in price for the last several days.Today it closed at $50 per share.You want to purchase this stock in the morning using your online brokerage account.You are willing to pay up to $53 a share but no higher.What type of purchase order should you use?

Is it possible to both accumulate wealth and preserve wealth with the same asset allocation strategy?

Diversification eliminates all the risk from your portfolio.

Some types of investments expose you to multiple sources of risk.

The risk that you will not be able to find a buyer at a fair market price,and will wind up having to sell for less than an asset's worth is called ________ risk.

When market interest rates go up investors demand ________ returns on other types of investments and when market interest rates go down,the return investors demand on other types of investments ________.

The real rate of return is the rate of return earned on an investment without any adjustment for inflation.

A ________ is an order to sell a security if the price drops below a specified level or to buy if the price climbs above a specified level.

For the international investor,exchange rate risk is simply another layer of risk.

Juan purchased shares in ABC company for $5,000 three years ago.During these three years he received $600 in dividends.He just sold the stock for $4,300.What was his total return on this investment?

The real rate of return is the nominal rate of return adjusted for inflation.

That portion of a stock's risk or variability that can be eliminated through investor diversification is called ________ risk.