Transcript investment-unit-4-corner-review

Investment Unit
4 Corner Review
Which of the following is not a true
statement?

A.
No one is going to make you save the money you need to start an
investment program.

B.

C.
Investment goals must be tailored to the particular financial needs of
the individual.

D.
Because investment objectives deal with the future, it is useless to
make long-term goals.
To be useful, investment objectives must be specific and measurable.
Which of the following steps should be
completed before starting an investment
program?

A.
Pick out at least two stocks or bonds to invest in.

B.
Work to balance your budget.

C.
Save at least $10,000 to invest.

D.
Invest in certificates of deposit.
All of the following statements are
considered to be good advice for a potential
investor before starting a personal
investment program except

A.
Work to balance your budget.

B.
Increase credit purchases and make installment payments in order to
increase cash available for investing.

C.
Manage your credit card debt.

D.
Start an emergency fund.
A _____________ is an employersponsored retirement account.

A.
TRA account

B.
301(a) account

C.
509(re) account

D.
401(k) account
As people approach retirement, which
of the following holds true for most?

A.
They choose more speculative investments.

B.
Their choices of investments do not change.

C.
They choose more conservative investments.

D.
They choose more risky investments.
The potential return on any investment
should

A.
Be directly related to the risk the investor assumes.

B.
Be inversely related to the risk of the investment.

C.
Not have any relationship to the risk of any investment.

D.
Be inversely related to the risk the investor assumes.
Which of the following risks reduces
your buying power?

A.
Inflation

B.
Interest rate

C.
Business failure

D.
Market
Which of the following risks deals with
fluctuations due to economic conditions?

A.
Inflation

B.
Interest rate

C.
Business failure

D.
Market
Which of the following risks deals with the
possibility that bad management,
unsuccessful products, or other factors will
cause the firm to be less profitable than
originally anticipated?

A.
Inflation

B.
Interest rate

C.
Business failure

D.
Market
Timothy Calibe owns common stock in
XYZWidgets.com. To reduce his business
failure risk, he should

A.
Buy more common stock in XYZWidgets.com.

B.
Buy preferred stock in XYZWidgets.com.

C.
Buy bonds in XYZWidgets.com.

D.
Continue to evaluate his investment in XYZWidgets.com after the
purchase.
Which of the following describes a
growth company?

A.
The company pays a large dividend.

B.
Earnings are reinvested in the company for future growth.

C.
Sales revenues are not growing.

D.
The company invests most of its money in safe securities like
government bonds.
If your main focus is to be able to buy or sell
an investment quickly without substantially
affecting the investment's value, you are
most concerned with

A.
Income.

B.
Growth.

C.
Liquidity.

D.
Business failure risk.
If you can leave your funds alone for 5-10
years or more, which of the following
investments would be most appropriate?

A.
Certificates of deposit

B.
Short-term government bonds

C.
Highly rated corporate bonds

D.
Stocks and mutual funds
To maximize profit or reduce dollar losses
when you sell your investments, it is
important to do all of the following except

A.
Keep purchase records.

B.
Monitor current values to spot opportunities for when to sell.

C.
Identify commissions or fees paid.

D.
Identify original dollar costs after you sell investments.
A discounted security means that the
actual purchase price is trading at

A.
The face value.

B.
Less than the maturity value.

C.
Greater than the face value.

D.
The value at maturity.
Which of the following statements is
false?

A.
The federal government sells bonds and securities to obtain financing.

B.
U.S. government Treasury securities carry a reduced risk of default
when compared to stocks.

C.

D.
Individual investors who purchase U.S. government securities must hold
the investments until maturity.
U.S. Treasury securities offer lower income potential than stocks.
A bond backed by the full faith, credit, and
unlimited taxing power of the government
that issued it is called a ____________ bond.

A.
debenture

B.
mortgage

C.
secured

D.
general obligation
A debt security issued by a state or local
government is known as a

A.
Treasury bond.

B.
Municipal bond.

C.
Corporate bond.

D.
Subordinated bond.
Generally, interest on corporate bonds is
normally paid every

A.
Month.

B.
Three months.

C.
Six months.

D.
Nine months.
If overall interest rates in the economy rise,
a corporate bond with a fixed interest rate
will generally

A.
Increase in value.

B.
Decrease in value.

C.
Remain unchanged.

D.
Become worthless.
Amanda wants to be part of the ownership
for a corporation. She should invest in

A.
Bonds.

B.
Common stock.

C.
Dividends.

D.
A savings account.
A distribution of money, stock, or other
property that is paid to owners of a company
is called a

A.
Bond.

B.
Common stock.

C.
Dividend.

D.
Savings account.
All of the following statements are
correct except

A.
Dividends are paid out of profits.

B.
Dividend payments must be approved by the stockholders.

C.
A dividend can be a distribution of money, but it can also be stock or
other property.

D.
Dividends are not mandatory.
Why does a company split its stock?

A.
The stock is trading at a low price, and the company wants to increase
its stock value.

B.

C.
The stock is trading at a high price, and the company wants to bring the
price in line with a theoretical ideal range.

D.
It wants the total market capitalization to be lower than the current
level.
It wants fewer shares outstanding.
Megan decided to start investing in stocks.
Which of the following should she do first?

A.
Base her investing decisions on hot tips she hears at work.

B.
Buy stocks based solely on her stockbroker's recommendation.

C.
Choose stocks based on recommendations from her family members.

E.
Research the corporations she is interested in as well as their industries.
A safe investment that generally attracts
conservative investors is called a(n) _______
stock

A.
blue chip

B.
income

C.
micro cap

D.
midcap
An investment that pays higher than average
dividends is called a(n) _______ stock.

A.
blue chip

B.
income

C.
micro cap

D.
midcap
Which of the following is some of the
information found on a financial website such
as www.finance.yahoo.com?

A.
52-week price range, number of shares traded (volume).

B.
Market capitalization.

C.
Dividend paid and yield.

D.
All of this information is included.
Annual reports

A.
Are available from a company for a fee.

B.
Are available only to current stockholders.

C.
Include the same information as a prospectus.

D.
Must be sent to all stockholders on an annual basis.
When analyzing a price-earnings ratio

A.
A higher price-earnings ratio indicates pessimism because the price is
too high compared to the earnings.

B.
The higher the price-earnings ratio, the more investors are paying for
earnings.

C.

D.
Price-earnings ratios are helpful when comparing two companies in the
same industry, but not to the market in general.
A low ratio indicates that investors expect higher earnings in the future.
Which of the following is a profitability ratio
that uses the number of outstanding shares in
the calculation?

A.
Capital gain

B.
Earnings per share

C.
Price per share

D.
Net income
Total return equals

A.
Dividend yield.

B.
Annual dividends in dollars plus capital gains.

C.
Capital gains.

D.
Annual dividends in dollars less capital gains.
Stephen wanted to become one of the owners
of GHI Corp. when it finally was available to
the general public. He participated in the

A.
Initial public offering.

B.
Investment bank.

C.
Primary market.

D.
Secondary market.
Kelly bought some stock using an investment
bank from the issuer of those securities. She
bought her shares on the

A.
Initial public offering.

B.
Investment bank.

C.
Primary market.

D.
Secondary market.
Terry wants to begin investing and needs
some guidance because he is uncomfortable
making investment decisions. He should use
a(n)

A.
Discount broker.

B.
Full-service broker.

C.
Market maker.

D.
Online broker.
If you buy or sell with this technique, you
may be required to pledge additional
collateral or cash for a loan.

A.
A call option

B.
Direct investing

C.
Buying on margin

D.
A put option
Rebecca owns stock that pays a dividend. She
does not want the cash now; instead she
would prefer to have more shares of stock.
She should use a

A.
Buy-and-hold technique.

B.
Direct investment plan.

C.
Dividend reinvestment plan.

D.
Dollar cost averaging technique.
Which type of fund has the prices determined
by factors of supply and demand like a stock?

A.
Closed-end fund

B.
SEC government fund

C.
Net asset value fund

D.
No-load fund
Which of the following is a fund that invests
in stocks or securities contained in a specific
stock or securities index?

A.
Closed-end fund

B.
Exchange-traded fund

C.
Net asset value fund

D.
No-load fund
Whose shares are issued and redeemed by
the investment company at the request of
investors?

A.
Exchange-traded fund

b.
Net asset value fund

C.
No-load fund

D.
Open-end fund
How is an ETF similar to a closed-end
fund?

A.
An investor can purchase as little as one share of a fund.

B.
Prices are determined by supply and demand and the value of stocks and
other investments contained in the portfolio.

C.
Prices are determined by investor expectations.

D.
All of these are correct.
Many mutual funds charge a commission
every time they are purchased by investors.
These are called

A.
Load funds.

B.
Closed-end funds.

C.
Exchange-traded funds.

D.
Net asset value funds.
Which class of shares charges a
commission when shares are purchased?

A.
A

B.
B

C.
C

D.
K
Which class of shares charges a commission
when withdrawals are made during the first
five years?
A.
A
B.
B
C.
C
D.
K
Which of the following types of stock funds
invests in stock issued by companies with a
long history of paying dividends?
A.
Equity income funds
B.
Growth funds
C.
Index funds
D.
International funds
Which of the following types of stock funds
invests in stock issued by companies
expecting higher-than-average revenue and
earnings growth?
A.
Equity income funds
B.
Growth funds
C.
Index funds
D.
International funds
Which of the following types of stock funds
invests in the same companies included in
the Standard & Poor's 500 stock index?
A.
Equity income funds
B.
Growth funds
C.
Index funds
D.
International funds
If you start a new job and are offered the
opportunity to participate in the company's
401(k) or 403(b) retirement plan, which of
the following decisions can affect your
financial future?
A.
Participating in the retirement account as a way to reduce income taxes.
B. Participating in the retirement account to take advantage of the employer's
matching contributions.
C. Basing your actual choice of investments on your age, how long before you retire,
and your tolerance for risk.
D.
All of these decisions would have a financial impact.
Which of the following is not correct?
A. Over the years, the majority of managed mutual funds have failed to
outperform the Standard & Poor's 500 stock index.
B.
Managed funds may be open-end funds or closed-end funds.
C. A benchmark of a good fund manager is the ability to increase share value
when the economy is good and retain that value when the economy is bad.
D.
A managed fund will outperform an index fund only 60% of the time.
Sally wants to invest in a mutual fund. The
mutual fund must provide a(n) ____ to her.
A.
analysis from a financial publication
B.
annual report
C.
prospectus
D.
quarterly report
Payments to investors related to the sale of
securities in the fund's portfolio are
A.
Capital gain distributions.
B.
Income dividends.
C.
Capital gains.
D.
Mutual fund money.
Which of the following is true about
mutual funds and taxes?
A.
Capital gain distributions are taxed when you sell your shares.
B.
Income dividends are taxed quarterly.
C. Investment companies are required to send each shareholder a year-end
statement that specifies how much each received in dividends and capital gain
distributions.
D.
Capital gains distributions are not taxed.