Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Because every company is almost certain to experience a bad year or two, holding on to stock for only one year

Accepted Answer

A)  is not a very sound investment decision. 
B)  is a very sound investment decision. 
C)  is a good idea for those who may need to liquidate their investment quickly. 
D)  diversifies one's portfolio risk.

Question 3

Publicly traded stocks listed on a major exchange are not very liquid investments.

Accepted Answer

A) True 
 B)False

Question 4

Your friend has recommended that you purchase stock in company XYZ. It is expected to pay a $4 dividend, and has historically grown at 5%. If the required rate of return is 12%, what is the estimated value of a share of XYZ stock?

Accepted Answer

A)  $23.53 
B)  $33.34 
C)  $57.14 
D)  $80.00

Question 5

A growth stock is known for its high dividend yields.

Accepted Answer

A) True 
 B)False

Question 6

What point marks the purchase of common stock without a right to a declared dividend?

Accepted Answer

A)  dividend payout date 
B)  declaration date 
C)  ex-dividend date 
D)  cut-off point 
E)  end of fiscal year

Question 7

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?

Accepted Answer

A)  $20 
B)  $75 
C)  $100 
D)  $105

Question 8

Some firms have negative earnings per share numbers.

Accepted Answer

A) True 
 B)False

Question 9

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?

Accepted Answer

A)  common stocks 
B)  government bonds 
C)  Treasury bills 
D)  mutual funds

Question 10

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

Accepted Answer

A)  dividend reinvestment 
B)  stock split 
C)  stock repurchase 
D)  stock reissue 
E)  none of the above

Question 11

The ________ is the date on which the board of directors announces the amount of the dividend.

Accepted Answer

A)  announcement date 
B)  declaration date 
C)  dividend date 
D)  ex-dividend date 
E)  maturity date

Question 12

Differentiate between the general classifications of common stock.

Accepted Answer

The answer of Differentiate between the general classifications of common...

Question 13

A proxy vote means

Accepted Answer

A)  filling out a voting form and having a representative turn it in for you. 
B)  requesting that your vote be deferred until a later date. 
C)  giving a representative the right to vote in your place. 
D)  None of the above.

Question 14

A firm may decide that the price per share for its stock is getting too high for the smaller investor so the company "splits the stock".

Accepted Answer

A) True 
 B)False

Question 15

You purchased 100 shares of Quantex at $150 per share for a total investment of $15,000. After your purchase the stock had a 3 for 1 split. How many shares do you now own and how much is your original investment now worth?

Accepted Answer

A)  100 shares and $150 dollars 
B)  300 shares and $15,000 dollars 
C)  100 shares and $45,000 dollars 
D)  300 shares and $45,000 dollars

Question 16

All of the following are stock market indexes except

Accepted Answer

A)  the Dow Jones Industrial Average. 
B)  the Standard & Poor's 500. 
C)  the Russell 100. 
D)  the Wilshire 5000.

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

Holding several types of stock can greatly reduce the risk in your portfolio.

Accepted Answer

A) True 
 B)False

Question 19

When all stocks move in the same direction, diversification among stocks works just as well as ever.

Accepted Answer

A) True 
 B)False

Question 20

Income stocks pay relatively low dividends, and offer a high potential for capital appreciation.

Accepted Answer

A) True 
 B)False

Exam 13: Investing in Stocks

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

Because every company is almost certain to experience a bad year or two, holding on to stock for only one year

Publicly traded stocks listed on a major exchange are not very liquid investments.

Your friend has recommended that you purchase stock in company XYZ. It is expected to pay a $4 dividend, and has historically grown at 5%. If the required rate of return is 12%, what is the estimated value of a share of XYZ stock?

A growth stock is known for its high dividend yields.

What point marks the purchase of common stock without a right to a declared dividend?

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?

Some firms have negative earnings per share numbers.

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?

A ________ increases the number of stock shares outstanding by replacing each existing share of stock with a stated number of new shares.

The ________ is the date on which the board of directors announces the amount of the dividend.

Differentiate between the general classifications of common stock.

A proxy vote means

A firm may decide that the price per share for its stock is getting too high for the smaller investor so the company "splits the stock".

You purchased 100 shares of Quantex at $150 per share for a total investment of $15,000. After your purchase the stock had a 3 for 1 split. How many shares do you now own and how much is your original investment now worth?

All of the following are stock market indexes except

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.

Holding several types of stock can greatly reduce the risk in your portfolio.

When all stocks move in the same direction, diversification among stocks works just as well as ever.

Income stocks pay relatively low dividends, and offer a high potential for capital appreciation.