Question 1

Investment banking firms specialize in serving as intermediaries between companies issuing new stocks and bonds and the investing public.

Accepted Answer

A) True 
 B)False  True

Question 2

Federal agency bonds pay slightly lower rates of interest than comparable-term Treasury securities.

Accepted Answer

A) True 
 B)False  False

Question 3

Speculative stocks typically pay little or no cash dividends.

Accepted Answer

A) True 
 B)False  True

Question 4

Corporate earnings are the profits a company makes during a specific time period.

Accepted Answer

A) True 
 B)False

Question 5

The potential return for any investment over a period of years can be determined by adding anticipated income to the future value of the investment minus its original cost.

Accepted Answer

A) True 
 B)False

Question 6

Rupert purchased 100 shares of Clarke Corporation for $28 a share last year.Clarke Corporation stock currently sells for $30 a share and pays $0.90 a share annually in cash dividends.What is the dividend yield on this stock?

Accepted Answer

A)  12.0 percent
B)  2.8 percent
C)  3.0 percent
D)  3.2 percent

Question 7

The higher one's tax bracket,the more favorable municipal bonds will be compared to other types of bonds.

Accepted Answer

A) True 
 B)False

Question 8

Technical analysis has proved to be a prominent tool in aiding investors to choose stocks.

Accepted Answer

A) True 
 B)False

Question 9

The interest rate printed on the bond certificate

Accepted Answer

A)  is generally paid monthly.
B)  is called the dividend yield.
C)  remains the same until maturity.
D)  All of these.

Question 10

When a bond is purchased at its face value,yield to maturity will be ____ the coupon rate printed on the certificate.

Accepted Answer

A)  more than
B)  less than
C)  the same as
D)  Not enough information is given to answer the question.

Question 11

Market analysts generally recommend that investors avoid companies with a price-to-sales ratio of greater than

Accepted Answer

A)  0.50.
B)  1.00.
C)  1.50.
D)  2.00.

Question 12

Owners of common stock vote to elect the corporation's management.

Accepted Answer

A) True 
 B)False

Question 13

A company with a price/earnings ratio of 10 should probably be avoided.

Accepted Answer

A) True 
 B)False

Question 14

Growth companies typically pay little or no cash dividends.

Accepted Answer

A) True 
 B)False

Question 15

Assuming a market rate risk of 8 percent and a return on Treasury bills of 4 percent,what would the total estimate of the required rate of return be for a stock with a beta of 1.7?

Accepted Answer

A)  13.6 percent
B)  13.7 percent
C)  14.8 percent
D)  17.6 percent

Question 16

Federal income tax on interest earned on a Series EE U.S.government savings bond may be deferred until the bond is redeemed.

Accepted Answer

A) True 
 B)False

Question 17

The Security Investors Protection Corporation (SIPC) is a government agency that insures investors against losses when stock prices fall.

Accepted Answer

A) True 
 B)False

Question 18

The term securities refers to the ownership instruments of common stock and preferred stock only.

Accepted Answer

A) True 
 B)False

Question 19

The face amount of a bond is the principal.

Accepted Answer

A) True 
 B)False

Question 20

The average corporation pays out 40 to 60 percent of its after-tax profit in cash dividends to stockholders.

Accepted Answer

A) True 
 B)False

Exam 14: Investing in Stocks and Bonds

Investment banking firms specialize in serving as intermediaries between companies issuing new stocks and bonds and the investing public.

Federal agency bonds pay slightly lower rates of interest than comparable-term Treasury securities.

Speculative stocks typically pay little or no cash dividends.

Corporate earnings are the profits a company makes during a specific time period.

The potential return for any investment over a period of years can be determined by adding anticipated income to the future value of the investment minus its original cost.

Rupert purchased 100 shares of Clarke Corporation for $28 a share last year.Clarke Corporation stock currently sells for $30 a share and pays $0.90 a share annually in cash dividends.What is the dividend yield on this stock?

The higher one's tax bracket,the more favorable municipal bonds will be compared to other types of bonds.

Technical analysis has proved to be a prominent tool in aiding investors to choose stocks.

The interest rate printed on the bond certificate

When a bond is purchased at its face value,yield to maturity will be ____ the coupon rate printed on the certificate.

Market analysts generally recommend that investors avoid companies with a price-to-sales ratio of greater than

Owners of common stock vote to elect the corporation's management.

A company with a price/earnings ratio of 10 should probably be avoided.

Growth companies typically pay little or no cash dividends.

Assuming a market rate risk of 8 percent and a return on Treasury bills of 4 percent,what would the total estimate of the required rate of return be for a stock with a beta of 1.7?

Federal income tax on interest earned on a Series EE U.S.government savings bond may be deferred until the bond is redeemed.

The Security Investors Protection Corporation (SIPC) is a government agency that insures investors against losses when stock prices fall.

The term securities refers to the ownership instruments of common stock and preferred stock only.

The face amount of a bond is the principal.

The average corporation pays out 40 to 60 percent of its after-tax profit in cash dividends to stockholders.