Chapter 10, 11, and 12

John bought stock for $350. A year later, he sold it for $385. What is his return on investment?

10%

Which of the following retirement plans is a tax-deferred plan in which employers sometimes match a portion of employee contributions?

401(k) plan

Which of the following retirement plans is a tax-deferred plan for employees of nonprofit organizations?

403(b) plan

When a company makes an initial public offering (IP0),

All of these

A contract purchased from an insurance company that guarantees a series of regular monthly payments for a set time

Annuity

A period in the stock market when stock prices are steadily decreasing

Bear Market

A debt instrument issued by a corporation or government

Bond

Examples of using leverage to complete a stock trade include

Both Selling Short & Buying on Margin

A period in the stock market when stock prices are steadily increasing

Bull Market

The process of borrowing money from a broker to buy stock is known as

Buying on margin

Unexpected emergencies or other unplanned events are known as

Contingencies

Which of the following types of bonds can be exchanged for shares of common stock?

Convertible Bond

Buying stocks and other investments directly from companies and holding them Selected:

Direct Investing

A bond that is sold for less than its face

Discount Bond

An order to buy (or sell) a stock that allows the broker to get the best possible price

Discretionary Order

Holding a variety of investments to reduce risk is known as

Diversification

Which of the following investment strategies involves investing on a regular basis regardless of market conditions?

Dollar-cost Averaging

A limit order is a request to buy or sell stock at the current market price

False

A premium bond is one that sells for less than its face value.

False

A stockbroker is a person who buys and sells securities on behalf of others but is not allowed to provide advice on which products to buy.

False

An initial public offering (IP0) is an example of a secondary market transaction in which you buy stock from company stockholders.

False

Common stock is considered a less risky investment than preferred stock or bonds.

False

Economic decline is not a good time to buy stocks because stock prices will be high.

False

It is more expensive to buy stock in round lots than it is to buy them in odd lots.

False

Municipal bonds are issued by state governments and the federal government

False

Reinvesting allows stockholders to buy new shares of stock at a reduced price from a stockbroker

False

Today, more employers are offering employer-sponsored retirement plans

False

The central bank of the United States, which is responsible for setting monetary policy and regulating the banking system, is the

Federal Reserve System

Which of the following organizations is a private, nonprofit organization that regulates firms selling securities in the United States?

Financial Industry Regulator Authority

A contract giving the right to sell a company's products and services

Franchise

The ideal investment

Has a high rate of return with low risk

Growth stocks and real estate are often considered to be

High Risk

Which of the following investment options typically has the highest risk?

Individual Stocks

Which of the following types of investments is a form of direct investing?

Individual Stocks

Which of the following types of investment risk could occur if prices in general rise faster than the return on an investment?

Inflation Risk

A collection of assets that provides diversification for an investor

Investment Portfolio

A measure of how quickly an asset can be turned into cash

Liquidity

Which of the following transactions is a request to buy or sell stock at the current price?

Market Order

Which of the following investment strategies requires a good understanding of the economy and financial market conditions as the basis for investment choices?

Market Timing

Which of the following investments is a medium-risk choice?

Mutual Funds

Which of the following types of investments is a form of indirect investment?

Mutual Funds

Fewer than 100 shares of stock

Odd lot

Which of the following types of investment risk could occur as a result of a new law, policy, war, or other current event?

Political Risk

A bond that is sold for more than its face value

Premium Bond

The financial market in which new issues of securities are sold is the

Primary market

When investors forego a cash dividend to receive more shares of stock in a company, this is a form of

Reinvesting

An individual retirement account in which contributions are taxed, but earnings are not

Roth IRA

Exactly 100 shares or multiples of 100 shares of stock

Round Lot

Ownership interest in a publicly held company

Stock

Which of the following types of investment risk could occur as a result of a company's poor management or product recalls?

Stock Risk

The issuance of more stock to current shareholders in proportion to the stock they already owned

Stock Split

A strategy of making regular and systematic changes in stock ownership based on trends in the economy

Stock Turning

Which of the following transactions is a request to sell stock when it reaches a certain price?

Stop Order

A long-term, planned approach to making investments is called

Systematic Investing

A strategy that involves regularly setting aside cash that can be used to achieve goals is called

Systematic Saving

A traditional IRA is

Tax deferred

When investing, the higher the risk you are willing to take

The greater your possible return may be

All of the following are true about government bonds except

They make only low-risk investments

All of the following are true about investment clubs except

They make only low-risk investments

A retirement account becomes portable when it is vested and can be rolled over to another account

True

A typical CD is not a liquid investment because you must pay a penalty if you withdraw the money before the stated time.

True

Money in a traditional IRA may not be withdrawn before age 59 1/2 without paying a penalty.

True

Political events in this country and abroad often affect financial markets.

True

Selling short involves selling stock that has been borrowed from the broker and replacing it later.

True

The SEC is the primary overseer and regulator of U.S. securities markets.

True

Which of the following government agencies is responsible for the economic security of the United States?

U.S. Department of the Treasury