Personal Finance Exam 4 Study Set

True or false: To purchase a closed-end mutual fund, you would purchase shares directly from the mutual fund company at any time.

false Reason: . With closed-end funds, no additional shares are issued by the company. Shares are purchased on the stock exchange.

Shareholders in mutual funds can receive return on investment:

from dividends and interest income. from the sale of their shares for a profit. from capital gains distributions.

A mutual fund that invests in companies expecting higher-than-average revenue and earnings growth is called a(n) _____________ fund.

growth

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

income

A securities exchange is a marketplace where member brokers who represent ________ buy and sell securities.

investors

Securities sold at a particular exchange must be first _____ or ______ for trading

listed, accepted or approved

A mutual fund in which investors pay a commission every time they purchase shares is called a(n) ________ fund.

load

A stock issued by a corporation that has capitalization of between $2 and $10 billion is known as what kind of stock?

mid cap

Equity Capital

money that a business obtains from its owners, shareholders, investors, or stockholders

Ophelia Peterson has been thinking about investing in corporate bonds. She is concerned about safety and wants the most secure bond investment possible. She would most likely invest in _____________ blankbonds.

mortgage

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a(n) _____________

open-end

Which of the following are typical types of mutual funds?

open-end exchange-traded closed-end

What information is found in a prospectus?

par value report investor line report Mergent's report

A growth company generally:

pay little or no dividend

A ________ market is a market in which an investor purchases financial securities via an investment bank or other representative from the issuer of those securities.

primary

Value Line and Morningstar are two Blank______ that provide detailed information on mutual funds.

professional advisory services

The corporations must disclose corporate earnings, assets, liabilities, products, or services and the qualifications of top management in a _____

prospectus

Taxes can affect which of the following areas of investing?

rental income dividends interest

The rate of return_______ return , can vary in percentage, yet every percent greater makes a significant impact on future value.

return, interest

An example of a direct real estate investment is a:

single family dwelling. (single family home)

Yasmin Al-Fadl plans to retire in the year 2050. She is considering a fund that will be more risk-oriented now and become increasingly conservative as she approaches retirement. Which of the following funds would you recommend to her?

target-date fund

The consequences of ___ must be considered when SELLING an invenstment

tax

turnover ratio

the turnover ratio measures the percentage of a fund's holdings that have changed or been replaced during a 12 month period

Net asset value (nav) formula

value of the funds portfolio - liabilities / number of outstanding shares

Jasmine Hill purchased 100 shares of Goshen Systems stock for $32.50 per share. Her commission for this purchase was $25. She sold the stock two years later for $45 per share and a commission of $40. What was Jasmine's total dollar return on this stock?

$1,185 Net sale value - net buy value = dollar return on stock net sale value = sale price X shares - commision net buy value = buy price X shares + commision

Saida Malek buys an apartment building for $2 million. Which one of the following demonstrates the highest degree of financial leverage?

$100,000 down payment and loan of $1,900,000

Cristiano Pedroso earns $80,000 a year. His monthly expenses total $4,500. What is the minimum amount of money that he should set aside in an emergency fund?

$13,500 The amount should be 3 x your monthly expenses. $4,500x3=$13,500

Twenty years ago, you began investing $200 a month. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $128,000. How much did you earn on your investments over the 20-year period of time?

$80,000

Joelle Cardenas owns 200 shares of a stock. For the last calendar quarter, the company paid a dividend of $0.45 a share. What is the total amount she received in her dividend check for this quarter?

$90 dividend per share X number of shares owned = dividend check

The Royalty Fertilizer Company's stock is selling for $64 in the market and its earnings per share is $8. The company is projected to grow at a rate of 16 percent over the next year. What is this company's price/earnings to growth ratio?

.5 P/E ratio = P/EPS = 64/8 = 8 Growth rate = P/E ratio/Growth rate = 8/16 = .5

A contingent deferred sales load can range from % to % of withdrawals depending on how long you own the fund before making the withdrawal.

1 to 5

The beta for the S&P 500 is defined as:

1.0

Becker Lane Manufacturing has after-tax income of $6 million. It also has 4 million shares of stock outstanding. What is the corporation's earnings per share?

1.5 Earnings per share = after tax net income/ outstanding shares 6/4= 1.5

The All-Star Basic Value Fund's portfolio is valued at $105 million. The fund has liabilities of $2.5 million, and the fund's net asset value is $6.25 million. What is the fund's number of shares outstanding?

16,400,000 funds net asset value = net assets / # of outstanding shares 6.25 = 102.5 / # of outstanding shares # of outstanding shares = 102.5 / 6.25 # of outstanding shares = 16.4

Hawkeye Wiring, Incorporated has 1,000 shareholders who own a total of two million shares of its common stock. The stock currently sells for $80 per share. The company earned $8 million after taxes. The annual dividend is $0.50 per share. The company has assets of $125 million and liabilities of $25 million. What is the P-E ratio?

20 P/E ratio= price per share / earning per share price per share= 80 earning per share = earning after tax/number of shareholders =8/2 = $4 80 / 4 = 20

The Capitalist Mutual Fund's portfolio is valued at $40 million. The fund has liabilities of $2 million, and the investment company sponsoring the fund has issued 1,250,000 shares. What is the fund's net asset value?

30.4 Fund net asset value -- net assets/# of shares issued =38,000,000/1,250,000 =30.40

If the approximate market value for of a $1,000 corporate bond is $1,200 and it pays 6 percent interest, then what are comparable bonds paying?

5 percent Annual interest= face value x interest rate = 1000 x 6% = 60 Approx. market value= annual interest/ comparable interest rate 1200 = 60/ comparable interest rate comparable interest rate = 60/1200 comparable interest rate = 5%

You are a taxpayer in the 24 percent tax bracket and you own a tax-exempt bond that pays 6 percent. What is your taxable equivalent yield?

7.89% taxable equivalent yield = (tax exempt bond yield) / (1-taxrate) = 6/(1-.24) =7.89 percent

The maximum sales fee on a load fund is ______%.

8 1/2

Securities Exchange

A marketplace where member brokers who represent investors buy and sell securities.

The maturity date is the date on which the entity repays the Blank______. Multiple choice question.

Borrowed money

Rafael Barroso just bought a stock which he expects will provide him with a quarterly cash payment, although that payment is not guaranteed. In fact, he expects the amount of the payment to vary over time. What type of payment is he expecting to receive?

Dividend

True or false: Speculative investments are medium-risk investments made with the hope of earning a relatively large profit in a short amount of time.

False: Speculative investments are high rick investments

A stock issued by a corporation that has the potential of earning profits above the average profits of all economies is known as what type of stock?

Growth

Which of the following are subscription services that provide detailed mutual fund information?

Morningstar Value Line Lipper

price earnings to growth ratio

Price earnings ratio/growth rate

P/E Ratio

Price to earnings ratio

Price to earnings ratio

Price/Earnings per share

The Green Bay Corporation holds its annual meeting in April. Corrina Warren, who owns stock in the company, cannot attend the meeting. She can vote by:

Proxy

Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the:

S & P 500

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.

Larissa Haas contributes six percent of her monthly earnings to her 401k plan at work. The plan allows her to invest in several different types of mutual funds and her employer matches up to 3 percent of her salary. Which suggestion for obtaining the money she needs for investing is she following?

Taking advantage of employer-sponsored retirement programs

Book Value

The book value for a share of stock is determined by deducting all liabilities from the corporations assets and dividing the remainder by the number of outstanding shares of the common stock

Net Asset Value (NAV)

The current market value of the securities contained in the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding

When looking at investment, what is the first question you should ask yourself?

What is important to you and what do you value?

debenture

a corporate bond that is backed only by the reputation of the issuing company.

Proxy

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

open-end fund

a mutual fund whose shares are issued and redeemed by the investment company at the request of investors

Market Order

a order is a request to buy or sell a stock at the current price.

Investors buy precious metals as a safe haven during:

an economic upheaval. upheaval - time of confusion and worry

When shares are sold back to the investment company that sponsors the fund, the fund is Blank______.

an open-ended fund

A mutual fund that invests in stocks and bonds with the primary objectives of conserving principal, providing income, and long-term growth is called a(n) _____________ fund.

balanced

A measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Stock Index is called:

beta

What is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock?

book value

You can get a mutual fund prospectus:

by requesting one by mail. by calling a toll free number. by accessing the company's website.

Systematic withdrawals from a mutual fund may be made:

by withdrawing a fixed percentage of the asset growth each period. by selling off a specific number of shares each investment period. in a specific dollar amount each investment period.

A ____ -end fund issues shares only when it is organized and its shares are usually traded on a stock exchange.

closed

For most mutual funds, the net asset value is calculated at the close of trading each:

day

A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________blank bond.

debenture

Easing of international tensions or disinflation causes gold prices to:

decline

If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally:

decrease in value

Real estate investments are classified as:

direct or inderect

The annual dollar amount of income generated by an investment divided by the investment's current market value is called _____

dividend yield

A corporation's earnings divided by the number of outstanding shares of a firm's common stock is called Blank______.

earnings per share

Which of the following provide historical measures?

earnings per share price-earnings ratio beta