business ch 10

Buy-and-hold investors put their faith in the ability of the overall market to continue the long-run upward trend it has exhibited throughout its history. One way that many buy-and-hold investors do this is by: a. investing in index mutual funds and exchange-traded funds. b. solely purchasing low-risk securities such as government bonds. c. making frequent trades. d. buying and selling the securities as soon as they acquire them.

a

_____ are not-for-profit organizations owned by their depositors, which strive to pay higher interest rates on member deposits and charge lower interest rates on loans. a. Credit unions b. Agricultural banks c. Investment banks d. Savings and loan associations

a

_____ is found by dividing the dividend per share by the previous day's price per share. a. Yield b. Market cap c. Day's range d. Earnings per share

a

Passed during the early twenty-first century, the _____ increased the Securities and Exchange Commission's authority to regulate financial markets and investigate charges of fraud and unethical behavior. a. Securities Act b. Sarbanes-Oxley Act c. Gramm-Bliley-Leach Act d. Banking Act

b

The Securities Exchange Act of 1934 required that all publicly traded firms with at least _____ file quarterly and annual financial reports with the Securities and Exchange Commission (SEC). a. 2000 shareholders and $500 million in assets b. 500 shareholders and $10 million in assets c. 100 shareholders and $50 million in assets d. 1000 shareholders and $100 million in assets

b

The _____ established the Federal Deposit Insurance Corporation, which insured depositors against financial losses when a bank failed. a. Securities Exchange Act of 1934 b. Glass-Steagall Act of 1933 c. Securities Act of 1933 d. Federal Reserve Act of 1913

b

Which of the following statements is true of exchange-traded funds (ETFs)? a. ETFs can be traded only at the end of the day. b. ETFs usually have lower costs and fees than mutual funds. c. ETFs are similar to mutual funds in how their shares are distributed. d. ETFs usually do not require brokerage commissions.

b

Which of these statements is true of the Dodd-Frank Act of 2010? a. This law reversed the Banking Act's prohibition of banks selling insurance or acting as investment banks. b. This law created the Financial Stability Oversight Council to identify emerging risks in the financial sector. c. This law created the Federal Reserve System (the Fed) to serve as the central bank in the United States. d. This law included provisions to ensure that external auditors had no authority to investigate unethical behavior.

b

_____ are financial intermediaries that obtain funds by accepting checking and savings deposits from individuals, businesses, and other institutions, and then lending those funds to borrowers. a. Angel investors b. Depository institutions c. Custodian banks d. Brokerage firms

b

_____ are financial intermediaries that participate directly in securities markets, buying and selling stocks and bonds for their own account. a. Accredited investors b. Securities dealers c. Securities brokers d. Credit unions

b

_____ are securities dealers that commit to continuously offering to buy and sell specific NASDAQ-listed stocks. a. Venture capitalists b. Market makers c. Accredited investors d. Angel investors

b

_____ are shares traded on securities markets that represent the legal right of ownership over part of a basket of individual stock certificates or other securities. a. Convertible securities b. Exchange-traded funds c. Zero coupon securities d. Preferred stocks

b

Investors who employ the buy and hold investment approach: a. can afford to leave their money invested only for a small period. b. avoid investing in index mutual funds. c. purchase a diversified portfolio of securities and keep them for a long period of time. d. make quick gains by buying and selling the securities as soon as they acquire them.

c

The _____ is an index based on the adjusted average price of stocks of 30 major corporations picked by the editors of the Wall Street Journal. a. Nikkei 225 Index b. Standard and Poor's 500 c. Dow Jones Industrial Average d. NASDAQ Composite Index

c

Which of the following approaches for investing in securities requires intensive research to identify discrepancies between a company's true worth and its current market price? a. Buying and holding b. Investing for income c. Value investing d. Momentum trading

c

Which of the following is true of bonds? a. Bondholders cannot sell their bonds to other investors before they mature. b. Long-term bonds issued by corporations usually mature five years after issuance. c. When a bond's market price is above its par value, it is selling at a premium. d. A bond is an informal debt instrument that comes in a single format.

c

A(n) _____ is an organized venue for stockbrokers and securities dealers to trade listed stocks and other securities for their clients. a. credit union b. secure investment bank c. primary securities market d. securities exchange

d

In the context of buying securities, which of the following statements is true of a buy limit order? a. It instructs a broker to buy a stock just before it becomes undervalued in the market. b. It instructs a broker to buy a security at the current market price. c. It tells a broker to buy and sell a security only when its price has been constant for a given period of time. d. It tells a broker to buy a stock only if its price is at or below a specified value.

d

The _____ on a bond expresses the annual interest payment as a percentage of the bond's par value. a. current yield b. stock index c. total value d. coupon rate

d

Which of the following statements is true of mutual funds? a. Investors in a mutual fund pay a nominal fee. b. The shares are traded like stocks in an open-end mutual fund. c. A fund manager does not select the assets in a fund's portfolio. d. It is easy to withdraw funds from a mutual fund.

d

_____ is an arrangement under which an investment banker agrees to purchase all shares of a public offering at an agreed-upon price. a. A mutual fund b. Alternative trading c. A convertible security d. Underwriting

d