Fin mang. ch 12
If a mutual fund's portfolio is valued at $500 million while there are liabilities of $100 million, what would be the NAV if there were 30 million shares outstanding?
$13.33
If a mutual fund's portfolio is valued at $500 million while there are liabilities of $6 million, what would be the NAV if there were 30 million share
$16.47
If you are investing $10,000 in a mutual fund that charges a 5.75% front-end sales load, how much of your investment will be available to purchase shares?
$9,425
Which of the following is the correct formula for NAV?
(Total value of all the assets in the mutual funds less the fund's liabilities)/number of shares outstanding
Small-cap funds invest in smaller companies with a total capitalization of less than $____ billion.
2
Annual dividend is $1.65, and market value is $78. Solve for dividend yield.
2%
A price-earnings ratio above ______ indicates investor optimism and is considered high.
20
Midcap funds invest in companies with total capitalization of $___ billion to $____ billion.
2; 10
If the price per share is equal to $75.00 and earnings per share is equal to $2.50, then the price-earnings ratio is equal to ____
30
Which type of dividend payment is very unusual?
Company products
Which of the following is not an advantage of investing in preferred stocks?
Dividends may be omitted by board of directors
True or false: Balanced funds invest only in stocks with the primary objective of growth.
False
True or false: Dividend payments are required from corporations.
False
Which of the following is not a recommended way to be a better stock investor?
Ignore company warnings that earnings will continue to fall
Investors may choose preferred stock because it offers a predictable source of ____.
Income
One advantage of investing in a mutual fund is:
Increased diversification
What types of information can be found in a mutual fund prospectus?
Information about buying and selling shares Information about the fund's past performance Information about the fund's management Information about dividends and distributions
The following occurs when a corporation sells stock to the general public for the first time.
Initial public offering (IPO)
A financial firm that assists corporations in raising funds, usually by helping to sell new security issues is called a(n):
Investment bank
The net asset value is calculated by dividing the current ______ value of the fund's portfolio (reduced by liabilities) by the number of outstanding shares.
Market
______ (Small/Medium) funds invest in companies with total capitalization of $2 billion to $10 billion.
Medium
______ ________ funds invest in short-term government securities, and other highly liquid investments.
Money market
Bob and Jane both invest $100 in mutual funds. Bob's fund charges 8.5% load and Jane's fund is no-load. Which statement is true?
Only $91.50 of Bob's investment of $100 goes to buy shares
Which of the following are classifications of mutual funds?
Open-end Closed-end
In the case of bankruptcy, who has first claim to the corporation's assets after creditors?
Preferred stockholders
Initial public offerings (IPO) are considered:
Risky
Which of the following is true about an open-end mutual fund?
Shares are issued and redeemed by the investment company at the request of investors.
Which of the following is true?
Stocks of companies who cannot meet NYSE requirements may trade on the OTC
Which of the following sells your stock at a specific price in order to prevent further financial damage?
Stop-loss order
True or false: An investment company's prospectus contains details relating to management fees, sales fees, 12b-1 fees, and other expenses.
True
Which of the following would offer tax advantages?
US government bond funds Municipal bond funds
Julie has invested in a mutual fund tied to the NASDAQ index. What relationship will her fund have with the index in terms of price fluctuation?
When the NASDAQ stocks decrease, the value of Julie's investment mirrors the decrease.
A mutual fund company must provide a prospective investor with a prospectus ___________ (before/after) the fund is purchased.
before
Corporate dividends for common stock may take the form of _______, additional _______, or other ______.
cash stock or shares property
A(n) ________-end fund issues shares only when it is organized and its shares are usually traded on a stock exchange.
closed
The key difference between exchange-traded and closed-end funds is:
closed-end funds are actively managed by portfolio managers while exchange-traded funds are invested in the stocks of a certain index
______ stock usually carries voting rights, _____ where stock typically carries no voting right.
common; preferred
A _____ ______ sales load is charged if fund shares are redeemed before a given number of years of ownership.
contingent deferred
The price of a company's stock will increase ______ if the future expectations decreases.
decrease
When selling short (borrowing stock and then replacing it later) it is the investor's desire that the stock:
decrease in value
The higher the _____ yield, the more potential for a stronger investment.
dividend
An advantage of being a preferred stockholder is the ability to receive cash _______ before common stockholders.
dividends
Equity income funds invest in stocks with a long history of paying ______
dividends
For stockholders, ______ are typically paid on a quarterly basis if they are paid.
dividends
If you place a limit order to buy a stock at a price of $25 a share, the stock will not be purchased until the stock price:
drops to $25 or lower
According to many analysts, one of the most influential factors on future price is the ability of a company to generate:
earnings in the future
Price-earnings (PE) ratio equal price per share divided by:
earnings per share
Price-earnings ratio is equal to the price of a share of stock divided by the corporation's ______ per ______ of stock.
earnings; share
Three key benefits of investing in mutual funds are convenience, __________, and transparency.
efficiency
A category of mutual funds that invest in stocks with a long history of paying dividends are called
equity income funds
After stock is sold to the public, the federal government requires that corporations report financial information to the Securities and __________ Commission.
exchange
traded funds invest in the stocks or securities contained in a specific stock or securities index.
exchange
Professional management is less of a concern with exchange-traded funds because:
exchange-traded funds invest in the stocks of an index so very little management is needed
All the different management fees and operating costs for a specific mutual fund are referred to as a(n) _____ ratio.
expense
True or false: A direct investment plan is a plan where stockholders purchase stocks from a company itself.
false
True or false: An index fund usually has a very high expense ratio.
false
True or false: Balanced funds invest only in stocks with the primary objective of growth.
false
True or false: To purchase a closed-end mutual fund, you would purchase shares directly from the mutual fund company at any time.
false
Interest paid on U.S. government securities is taxable for _______ income tax purposes, but is exempt from ______ and local taxation.
federal; state
An initial public offering is when a corporation sells stock to the public for the time.
first
A mutual _____ pools investors' money to invest in various securities.
fund
An investment bank is a financial firm that assists corporations in raising _______ , usually by helping to sell new security issues.
funds
Money market funds invest in:
government securities and other safe and highly liquid investments
When an investor receives a mutual fund prospectus
he or she should read it completely before investing
The higher the company's expected future earnings, the the stock value.
higher
An advantage of being a preferred stockholder is the ability to receive cash _____ before common stockholders.
increase in value
Cheaper to manage, ______ funds have lower management fees and expense ratios than other types of funds.
index
Exchange-traded funds are funds and track stock market indexes.
index
Normally small-cap funds offer more opportunity for growth than ____ -cap funds.
large
An allowance to set minimum or maximum prices before a stock trade is called a
limit order
high price-earnings ratio - More investors will pay for earnings More investors will pay for earnings
low price-earnings ratio - Less investors will pay for earnings Less investors will pay for earnings
The request to buy or sell a stock at the current market value is called a:
market order
For a corporate bond, the date on which the corporation is to repay the borrowed money is called:
maturity date
With a(n) _______-end fund, the shares are issued and redeemed by the investment company at the request of the investors.
open
One advantage of dividend reinvestment plans is that your dividends are reinvested by the company and you can be issued ______ shares for the dividend.
partial
The amount of the dividend with a(n) ______ stock is known before purchasing the stock.
preferred
The price of a share of stock divided by the corporation's earnings per share of stock is called
price-earnings ratio
If you want to find a mutual fund's objective and fee schedule, you would look at the:
prospectus
Most dividends are paid on a(n) ______ basis.
quarterly
When the Standard & Poor's 500 index increases, index mutual funds that invest in these stocks .
rise
A _____ fund invests in companies within the same industry.
sector
Sector funds invest in companies within the same _____
sector
Selling stock that has been borrowed from a brokerage firm and must be replaced at a later date is called:
selling short
A dividend reinvestment plan allows current stockholders the option to reinvest or use their cash dividends to purchase additional of the corporation.
share
The advantages of investing in an exchange-traded fund include:
shares can be bought and sold anytime during the day rather than at the close of business lower transaction fees
Who elects the board of directors and approves major changes in the corporate policies?
stockholders
Common ______ elect the board of directors.
stockholders or shareholders
You buy a stock at $30 per share and want to sell your stock automatically if it reaches $23. This is an example of a(n) _____-_____ order.
stop-loss
An order to sell a particular stock at the next available opportunity after its market price reaches the stop price is called a:
stop-loss order
You buy a stock at $30 per share and want to sell your stock automatically if it reaches $23. This is an example of a(n) ____ ____ order.
stop; loss
______, and _______-_______ orders are known as stop-loss orders because investors use them to lock in the profits of their trades.
stop; stop-limit
True or false: A front-end load fund charges a commission when shares are purchased.
true
True or false: A no-load fund does not have a sales charge.
true
True or false: The first step in selling short stock is to borrow the stock from your broker.
true
True or false: You should probably stick to investing in companies that you somewhat understand
true
A dividend yield is the annual dollar amount of income generated by an investment divided by the investment's current share _____.
value
Mutual funds that invest in stocks of companies with total _____ of $10 billion or more are called large-cap funds.
value
One benefit of investing in a no-load fund over a load mutual fund would be:
with a no-load fund, 100% of your investment is used to buy shares
