Question 1

The business risk faced by an investor when investing in a company is related to:

Accepted Answer

A)  changes in the price level in the economy.
B)  investor behavior in the market.
C)  the book value of firm's assets.
D)  the firm's ability to meet operating expenses in a timely manner.
E)  security price fluctuations.F) B) and E)
G) None of the above

Question 2

_____ risk results from the behavior of investors in the securities market.

Accepted Answer

A)  Business
B)  Financial
C)  Market
D)  Purchasing power
E)  Interest rateF) B) and E)
G) C) and D)

Question 3

Which of the following types of risks affects owners of fixed income securities more than owners of equity securities?

Accepted Answer

A)  Business risk
B)  Event risk
C)  Market risk
D)  Interest rate risk
E)  Purchasing power riskF) All of the above
G) A) and D)

Question 4

The Smith family owns 200 shares of Elta stock.The company declared a 5 percent stock dividend.The Smiths now own:

Accepted Answer

A)  200 shares.
B)  205 shares.
C)  210 shares.
D)  420 shares.
E)  410 shares.F) A) and E)
G) A) and D)

Question 5

Which of the following investments have the highest liquidity risk?

Accepted Answer

A)  Common stocks
B)  Corporate bonds
C)  Treasury bonds
D)  Land
E)  Mutual fund sharesF) A) and D)
G) All of the above

Question 6

An investor receives return from an investment due to:

Accepted Answer

A)  recurring nature of a deposit.
B)  capital gains on sale of an investment.
C)  asset allocation among different asset classes.
D)  rebalancing by buying more equities.
E)  diversification among or within asset classes.F) A) and E)
G) C) and D)

Question 7

The advantages of a dividend reinvestment plan (DRP) may include:

Accepted Answer

A)  stock sold at a discount.
B)  guaranteed rate of return.
C)  tax advantages.
D)  convertibility option.
E)  repayment of the principal.F) A) and E)
G) All of the above

Question 8

An investment is acceptable if the expected rate of return is greater than the required rate of return.

Accepted Answer

A) True 
 B)False

Question 9

The higher the net profit margin of a company,the more money the company earns.

Accepted Answer

A) True 
 B)False

Question 10

Stocks can be used aggressively by investors seeking current income,and bonds can be used aggressively by investors seeking capital gains.

Accepted Answer

A) True 
 B)False

Question 11

Cash dividends on common stock are most often paid:

Accepted Answer

A)  weekly.
B)  monthly.
C)  quarterly.
D)  semi-annually.
E)  annually.F) A) and E)
G) B) and D)

Question 12

The higher the tax bracket you are in,the more attractive the purchase of stocks becomes.

Accepted Answer

A) True 
 B)False

Question 13

Stock profitability is often measured by:

Accepted Answer

A)  book value.
B)  return on equity.
C)  market value.
D)  net profit margin.
E)  beta.F) A) and B)
G) None of the above

Question 14

Stocks whose earnings have increased at an above average level over time are called:

Accepted Answer

A)  cyclical stocks.
B)  growth stocks.
C)  income stocks.
D)  speculative stocks.
E)  defensive stocks.F) A) and B)
G) C) and D)

Question 15

__________ is a measure of stock investors' confidence in a corporation. ​

Accepted Answer

A)  Price/earnings ratio
B)  Coupon rate
C)  Debt safety ratio
D)  Maturity valueE) C) and D)
F) B) and C)

Question 16

The value of a stock at any time depends on its expected stream of future earnings.

Accepted Answer

A) True 
 B)False

Question 17

Changes in the value of securities due to social,political,or economic factors are referred to as market risk.

Accepted Answer

A) True 
 B)False

Question 18

Past returns on an investment are only an indication of future returns.

Accepted Answer

A) True 
 B)False

Question 19

Bondholders will receive interest payments after the stockholders receive dividends.

Accepted Answer

A) True 
 B)False

Question 20

A bond selling below par value is selling at:

Accepted Answer

A)  a discount.
B)  its coupon value.
C)  a premium.
D)  its maturity value.
E)  the highest effective yield.F) A) and D)
G) C) and D)

Exam 12: Investing in Stocks and Bonds

Changes in the value of securities due to social,political,or economic factors are referred to as market risk.

Correct AnswerverifiedShow Answer

A bond selling below par value is selling at:

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The business risk faced by an investor when investing in a company is related to:

Correct AnswerverifiedShow Answer

The Smith family owns 200 shares of Elta stock.The company declared a 5 percent stock dividend.The Smiths now own:

Correct AnswerverifiedShow Answer

An investment is acceptable if the expected rate of return is greater than the required rate of return.

Correct AnswerverifiedShow Answer

Past returns on an investment are only an indication of future returns.

Correct AnswerverifiedShow Answer

The higher the tax bracket you are in,the more attractive the purchase of stocks becomes.

Correct AnswerverifiedShow Answer

Which of the following investments have the highest liquidity risk?

Correct AnswerverifiedShow Answer

The higher the net profit margin of a company,the more money the company earns.

Correct AnswerverifiedShow Answer

The advantages of a dividend reinvestment plan (DRP) may include:

Correct AnswerverifiedShow Answer

An investor receives return from an investment due to:

Correct AnswerverifiedShow Answer

_____ risk results from the behavior of investors in the securities market.

Correct AnswerverifiedShow Answer

Cash dividends on common stock are most often paid:

Correct AnswerverifiedShow Answer

Stock profitability is often measured by:

Correct AnswerverifiedShow Answer

The value of a stock at any time depends on its expected stream of future earnings.

Correct AnswerverifiedShow Answer

Stocks whose earnings have increased at an above average level over time are called:

Correct AnswerverifiedShow Answer

Stocks can be used aggressively by investors seeking current income,and bonds can be used aggressively by investors seeking capital gains.

Correct AnswerverifiedShow Answer

__________ is a measure of stock investors' confidence in a corporation. ​

Correct AnswerverifiedShow Answer

Bondholders will receive interest payments after the stockholders receive dividends.

Correct AnswerverifiedShow Answer

Which of the following types of risks affects owners of fixed income securities more than owners of equity securities?

Correct AnswerverifiedShow Answer

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__________ is a measure of stock investors' confidence in a corporation.

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