Chapter 14: Investing in Stocks

You purchased Krispy Kreme stock valued at $12,000. Your full-service investment company charges $5 for commission. What is the total cost of the stock purchase?

$12,005

Which of the following must new investors master to become more proficient investors?

-knowing how to use relevant information -knowing where to find relevant information

Samantha wants to sell short stock in ExxonMobil. Rank the steps in the process.

1. She arranges to borrow a stock certificate for a number of shares. 2. Using the borrowed stock, she sells the stock. 3. She buys the same quantity of shares at a lower price. 4. She replaces the stock borrowed to her broker.

When buying stock on margin, the current margin requirement is ______%.

50

Hannah owns 300 shares of "Dirt International." The company does a 3 for 1 stock split. Hannah now has

900 shares

True or false: Net profits will be increased by interest on margined stocks.

False

True or false: Research and evaluation increase the risk associated with stock investments.

False

Corporate dividends for common stock may take the form of cash, additional ______, or company ______.

Stock, Products

The more ______ an investment has to work, the more money it will likely accumulate.

Time

True or false: The first step in selling short stock is to borrow the stock from your broker.

True

True or false: There are alternative sources for stock advisory services.

True

A stock selling ex-dividend will be trading:

at a lower price.

Securities sold at a particular exchange must be first ______, or ______for trading.

availible, product

"Left in the street name" is used to describe investor-owned securities held by a(n) ______ firm.

brokerage

Selling short is selling a stock that has been borrowed from a(n) ______ firm and must be replaced at a later date.

brokerage

You should purchase a ______ option if you believe the price of a stock will increase in a short amount of time.

call

If you think the market price of a stock will increase during a short period of time, you should purchase a:

call option.

Although policies vary, ______ are typically paid on a quarterly basis if they are paid.

dividends

An advantage of being a preferred stockholder is the ability to receive cash ______ payments before common stockholders.

dividends

Companies choose to pay ______ to keep stockholders happy and prosperous.

dividends

One method to avoid the investor's common pitfall of buying high and selling low is to use:

dollar cost averaging.

A company's Web site that can be viewed anytime is:

easily accessible

Beginning investors must find:

good information and know how to use it.

Dollar cost averaging is used to avoid buying ______ and selling ______ .

high, low

A(n) ______ stock is an investment that pays higher-than-average dividends.

income

Investors may choose preferred stock because it offers a predictable source of ______.

income

Stocks that offer larger returns include ______ and potential for losses.

increased risk

A request to buy or sell a stock at a specified price is called a ______.

limit order

The request to buy or sell a stock at the current market value is called a ______.

market order

A daily source of printed material that provides useful information about stocks is a(n):

newspaper

A corporation is under:

no legal obligation to buy back shares from the public.

A network of dealers who buy and sell the stocks of corporations that are not listed on a security exchange is called ______.

over-the-counter market

Fundamental investors will look at many factors when evaluating a company including new ______ development.

product

A ______ is a legal form that requests that stockholders transfer their voting rights to someone within the organization who know the situations of the company better.

proxy

A legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individuals or individual is called ______.

proxy

A ______ date is the date on which a stockholder must be registered in the corporation's books in order to receive dividend payments.

record

A date on which a stockholder must be registered on the corporation's books in order to receive dividend payments is called what?

record date

During the ex-dividend time period, the ______ is entitled to the declared dividend payment.

seller

Selling a stock that has been borrowed from a brokerage firm and must be replaced at a later date is called:

selling short.

A stock ______ is an event in which the shares of stock owned by existing stockholders are divided into a larger number of shares.

split

A stop-loss order is an order to sell a particular stock at the next available opportunity after its ______ price reaches a specified amount.

stock

Corporations don't have to repay the money a stockholder pays for the ______.

stock

An order to sell a particular stock at the next available opportunity after its market price reaches a specified amount is called a:

stop-loss order.

The key element to investing is ______.

time

Most companies like to pay dividends:

to keep investors happy.

The main reason to leave stock certificates with the brokerage firm is:

to make transfers easier upon sale.