ch. 15 investing in stocks - hoyt
Which of the following actions of the U.S. government could not be considered part of fiscal policy?
Federal Reserve open market operations
Limit orders can only be placed for a short period of time, usually a week or less
false
Some traders, called specialists, help to make a market in stocks by taking the same position as those who want to buy or sell the stock
false
Stocks are usually bought or sold in round lots, which are multiples of $100
false
The American Stock Exchange (AMEX) is the largest of the physical stock exchanges.
false
The daily stock quotations found in most large newspapers will not tell you the annual dividends paid per share of stock.
false
The income statement for a company is like a budget in that it shows how much money the company would like to have made in a given accounting period.
false
The most up-to-date quotes of stock prices may be found in The Wall Street Journal
false
You can currently borrow up to 75% of stock transactions under today's margin rate
false
annual report
financial statements, notes, and other company information
Fundamental analysis is based on all of the following except
firm's stock price over past year fundamental analysis is based off of: firm's revenue, earnings, and sensitivity to economic conditions
The means by which the U.S. government imposes taxes on individuals and corporations and by which it spends its money is the ________ policy.
fiscal
The Stimulus Act of 2009 is an example of the governments use of ________ to impact economic growth.
fiscal policy
A ________ trader is one who executes trades to fulfill orders placed by other investors
floor
People with seats on the NYSE who execute stock trades for others are called
floor traders
The valuation of stocks based on an examination of revenues or earnings is called
fundamental analysis
Compared to discount brokers, full service brokers
give clients stock advise
________ is a measure of economic growth that measures the total value of all products and services produced in the country.
gross domestic product
Usually, firms with high P/E ratios are ________ firms
growth
The ________ shows the firm's operating results over a period of time
income statement
An increased demand for stock ________ the price.
increases
Some stock brokers or analysts encourage frequent buying and selling of your securities which may cause you to
incur additional tax liabilities
A ________ order is an order to execute a transaction to buy or sell a stock only if the price is within the range specified.
limit
Generally, stocks perform better when interest rates are
low
An investment in stock requires all but
luck
Which of the following is not a good source of current stock quotations?
magazines such as the fortune
A ________ order is an order to execute a transaction to buy or sell a stock at its prevailing price.
market
On the over-the-counter market trades are executed by
market-makers
CPI
measure of inflation that represents consumer products
income statement
measures revenues, expenses, earnings for a specific time
The purchase of 48 shares of stock is considered a(n) ________ transaction
odd-lot
If you purchase stock ________ you are doing so with a portion of the funds borrowed from your broker.
on margin
If you are a day trader you would probably utilize a(n)
online brokerage service
Electronic communications networks that allow investors to buy or sell securities is called a(n)
over-the-counter market
on margin
purchasing stock with funds borrowed from a brokerage firm
If a firm performs strongly over a period of time the impact on its stock price is
relative
In reading a corporate income statement, cost of goods sold is subtracted from
revenue
When aggregate demand by consumers ________, firms produce ________ products to accommodate the demand.
rises; more
A ________ is an order for a brokerage firm to sell a stock when the price falls to a specified level.
sell stop order
) You bought IBM stock at $70 per share. It is now $120 a share. You think it could go higher but you are nervous that it could go down and you would lose your gains. To protect your gains but still give yourself the chance to make future profits you could place a
sell stop order at $100 a share
NASDAQ has less stringent trading requirements than the organized exchanges and tends to attract newer, high-tech companies.
true
On-line trading of stocks is not only less expensive than using traditional brokers, but is usually more convenient too.
true
Technical analysis and fundamental analysis are methods commonly used by investors to value stocks.
true
The daily stock quotations found in most large newspapers will tell you the closing price per share of stock for the previous day's trading, the range of prices the stock traded the previous day, and a range of trading prices for the last year
true
The two parts of a company's balance sheet: (1) assets and (2) liabilities and shareholder's equity, must be equal or in balance.
true
When you buy a stock on margin, your gain is magnified if the stock goes up in value
true
Fees charged by brokerage firms
vary based on the services offered
The Federal Reserve currently limits the margin rate, the amount that can be borrowed from the brokerage firm, to ________ percent.
50
You made a $10,000 stock purchase on margin (50%). You put $5,000 into your account initially to cover the purchase. Your stock has declined in value to $7,000 and you receive a margin call. How much cash must you put into your account as a result of the margin call?
$1,500
A stock purchased at a price of $22 per share, has risen to $46 per share. You wish to avoid losing your profit; therefore, you should put in a sell stop order at a price of
$40 a share
How much cash would you need to purchase 500 shares of stock at $21 per share plus brokerage commissions of $125, if you purchase on margin and the margin requirement is 50%?
$5,312.5 (500*21)+125 then divided by 2 cause your borrowing the other part of the money
Three hundred shares of stock are purchased on margin at a price of $42 per share plus $150 in brokerage commissions at a time when the margin requirement is 50 percent. How much additional cash would you need to deposit with your broker if the price of the stock dropped to $37 per share?
$825
A company's earnings are $3 per share, its dividend is $2 per share, and its stock price is $30 per share. Its PE ratio is
10
A round lot of stock is ________ shares
100
All of the following are odd lots except
200 shares what are odd lots: 99 shares, 189 shares, 970 shares
Interest rates can affect economic growth and therefore have a direct impact on stock prices
false
full service brokerage firm vs. discount brokerage firm
A full-service brokerage firm offers advice and transaction executions for a price. A discount brokerage firm offers only transaction executions at a substantial discount, between $8 and $20.
) Is investing on margin what the average investor should do?
Investing on margin is highly risky and should not be done unless the investor can afford to lose the money.
Where or how can you obtain a corporate annual report and additional investment analysis?
Many annual reports are on companies' Web sites or can be requested and mailed. Additional investment analysis for different companies is available on the Web and in reference materials.
The ________ is/are not a physical location, but rather an electronic communications network to buy and sell stocks.
NASDAQ
The largest stock exchange in the United States is the ________. Also is oldest and most popular organized stock exchange
NYSE
The stock exchange which is the largest in terms of dollar volume is the
NYSE
The stock exchange with the most stringent listing requirements is the
NYSE
The ________ is a measure of inflation that represents prices of products such as coal, lumber, and metals that are used to produce other products.
PPI
discount brokerage firm
a brokerage firm that executes transactions without advice
NASDAQ
a computerized network to buy and sell stocks
A low P/E ratio usually means that a firm is
a mature firm
With an online brokerage firm, you have all of the following except
a personal sales representative to answer your questions
market order
an order to buy or sell at the prevailing market price
sell stop order
an order to sell stock when the price falls to a specified level
The yield represents which of the following?
annual return from dividends
All of the following online publications provide information about inflation except
bloomberg these do: Yahoo. Federal Reserve. Consumer Reports
The demand for which of the following will decrease the most with a weak economy?
boats still will have demand for necessities
full service broker
broker advice plus transaction services
A ________ is an order for a brokerage firm to buy a stock when the price rises to a specified level.
buy stop order
Which of the following is the most risky?
buying on margin
When you place an order to buy or sell stock, you must specify all of the following except
commission your willing to pay you must tell them: ticker symbol, limit order, and if your buying or selling
A measure of inflation that represents prices of various products, such as groceries, household products, housing, and gasoline is the ________ index.
consumer price index
The ________ is the most common measure of inflation
consumer price index
One of the most commonly used measures of inflation is the
consumer price index(CPI)
Economic growth, as measured by increases in the gross domestic product (GDP) signals the start of a bull market where stock prices are bound to rise.
false
Stocks would be most favorably affected by
decline in interest rates and decline in inflation
When economic conditions are weak, the aggregate demand for products and services
declines
When corporate taxes rates are ________, the after-tax earnings of corporations are ________, which means ________ money for shareholders.
decreased; increased; more
To start an online brokerage account, you need to do all of the following except
deposit a minimum amount of shares already owned
A brokerage firm that executes your transactions without offering investment advice is a(n) ________.
discount brokerage firm
A PE of 10 means that the firm's stock price is ten times the firm's
earnings per share
The CPI is used as part of the ________ analysis
economy
Computer systems that match up purchases and sales of stocks even at night when the other exchanges are closed are
electronic communication networks
A discount brokerage firm executes transactions and provides investment advice at a price less than that of full-service brokers.
false
Assets and liabilities on the balance sheet are classified as
short-term and long-term
A ________ trader helps create a market in one or more stocks by taking an opposite position to the orders placed by clients
specialist
balance sheet
statement of assets, liabilities, and net worth
PE is
stock price divided by the companies earnings per share
A company's annual report usually includes all of the following but
testimonials from employees includes: letter from the CEO, an auditor's report, management discussion and analysis
Which of the following is not a reason some investors never purchase stock?
they don't want to make better returns
The best time to sell stock is when you
think its price has peaked
A ________ symbol is used to identify a stock for trading purposes
ticker
T is the ________ for American Telephone and Telegraph Company
ticker symbol
) In getting recommendations from brokers and analysts, you need to be careful that frequent suggestions to buy or sell are not being made in order to generate revenues for these traders.
true
) Low interest rates tend to entice investors into the stock market where they can achieve better returns.
true
A margin call is a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level
true
A market order is normally executed much more quickly than a limit order
true
A stop order is a special form of limit order; it is an order to execute a transaction when the stock price reaches a specified level
true
An odd lot is the purchase of less than 100 shares of stock.
true
Before buying a stock, you should estimate its future market value, just as you would the future value of a car or a home.
true
Fiscal policy, the means by which the U.S. government imposes taxes on individuals and corporations and spends its money, has an impact on spending and thus an impact on the stock of some companies.
true
Floor traders on the NYSE are willing to trade stocks for others and earn a commission for doing so.
true
If you don't need advice or other services offered, you are better off using a discount broker or Internet broker rather than a full-service broker.
true
