Banking Midterm

Jason is 58 years old, has strong financial health, a short time horizon, and an average risk tolerance. Which asset allocation you recommend? A.) 80% stocks and 10% bonds/cash equivalents. B.) 65% stocks and 35% bonds/cash equivalents. C.) 45% stocks and 55% bonds/cash equivalents. D.) 25% stocks and 75% bonds/cash equivalents.

C.) 45% stocks and 55% bonds/cash equivalents.

A "Bull Market" is... A.) A period of uninterrupted increases in stock prices B.) A period of long growth in a single stock's price C.) A period of general investor optimism that prices will increase

C.) A period of general investor optimism that prices will increase

If an analyst is "Bearish", they are signaling... A.) They think a recession will start soon B.) We are near a market trough C.) A single stock is probably overvalued D.) We are heading for a crash

C.) A single stock is probably overvalued

A "GTD" order is most likely used by... A.) A day trader B.) A trader protecting against long-term loss C.) A trader expecting a major announcement soon D.) All of the above

C.) A trader expecting a major announcement soon

Which of the following would be the cheapest way to invest in real estate? A.) By renting a home and sub-leasing it on AirBnb for a profit B.) By purchasing a large house and renting out a bedroom C.) By purchasing shares of a REIT D.) These are all very expensive options

C.) By purchasing shares of a REIT

Which of the following exchanges specializes in commodities? A.) NYSE B.) NASDAQ C.) CME D.) CBOE

C.) CME

The ____ phase in the business cycle is a period when the level of business activity declines and GDP falls. A.) Expansion B.) Peak C.) Contraction D.) Trough

C.) Contraction

The Sharpe Ratio is calculated by dividing ____ by ____ A.) Risk, Reward B.) Rewards, Risk C.) Returns, Variability D.) Variability, Returns

C.) Returns, Variability

When a natural disaster happens, what usually happens to stock prices? A.) Stock prices in all industries go up B.) Stock prices in all industries go down C.) Stock prices go up in some industries and down in other industries D.) Not enough information

C.) Stock prices go up in some industries and down in other industries

The Dividend Yield is.... A.) The amount of dividends paid out per year B.) The amount of dividends in each dividend payment C.) The amount of dividends per year, divided by the stock price D.) The amount of dividends in each payment, divided by the stock price

C.) The amount of dividends per year, divided by the stock price

A _________ account is an account you use to buy investments like stocks, bonds, and mutual funds. A.) full-service B.) checking C.) brokerage D.) savings

C.) brokerage

In order to implement contractionary policy, the government and Central Bank must ______ government spending, _____ taxes, and ______ interest rates. A.) increase, increase, increase B.) increase, decrease, decrease C.) decrease, increase, increase D.) decrease, decrease, decrease

C.) decrease, increase, increase

With a $1000 deposit and 50% margin, how much stock can you buy? A.) $500 B.) $1,000 C.) $1,500 D.) $2,000

D.) $2,000

Let's say you have a 50% margin trading account, and you use all of your buying power to buy a stock. This stock's price falls by 50%. How much money did you lose? A.) 25% B.) 50% C.) 75% D.) 100%

D.) 100%

Which of the following companies would most likely pay the highest dividend? A.) A biotech stock B.) An index ETF C.) A healthcare stock D.) A utility stock

D.) A utility stock

Which of the following best describes an ETF? A.) An investment that pays out regular interest payments, known as "Coupon Payments" B.) An investment that grants you partial ownership of a single company C.) An investment that locks your savings for a specified period of time in exchange for higher interest than a savings account D.) An investment that combines several stocks or other assets

D.) An investment that combines several stocks or other assets

An "investment portfolio" can include... A.) Just stocks B.) Just stocks, mutual funds, and ETFs C.) All of the above, plus bonds D.) Any assets that are being held as an investment

D.) Any assets that are being held as an investment

If you set a "Stop Sell" price at $30, your order will execute... A.) If the price rises above $30 B.) If the price falls below $30 C.) Immediately, if the current price is below $30 D.) Both B and C

D.) Both B and C

A diversified portfolio absolutely must... A.) Have multiple stocks from the same sector B.) Have some fund specializing in precious metals C.) Have an index ETF D.) Have multiple stocks from multiple sectors

D.) Have multiple stocks from multiple sectors

What does "IPO" stand for? A.) Interest Price Option B.) Initial Private Offering C.) Initial Price Open D.) Initial Public Offering

D.) Initial Public Offering

After shares are sold in an IPO, how much money does the original company get when stocks are traded on a secondary market? A.) Over 75% of the stock's value B.) About 50% of the stock's value C.) Around 5% of the stock's value D.) Nothing

D.) Nothing

A limit order is most likely to be used by... A.) Someone trying to protect against loss B.) Someone trading mutual funds C.) A "Buy and Hold" investor D.) Someone trying to maximize gains

D.) Someone trying to maximize gains

The ____ phase in the business cycle is a period that marks the end of declining business activity. A.) Expansion B.) Peak C.) Contraction D.) Trough

D.) Trough

You have a 50% margin account, and buy one share of a stock currently trading at $100. What is your maximum profit? A.) $50 B.) $100 C.) $200 D.) Unlimited

D.) Unlimited

An increasing unemployment rate is associated with a growing economy. True False

FALSE

True or False - The S&P 500 has had a positive return every year for the last 100 years TRUE FALSE

FALSE

Steadily increasing inflation is associated with a growing economy. True False

TRUE

True or False - When comparing two stocks with similar returns, you would prefer the option with the higher Sharpe Ratio TRUE FALSE

TRUE

Miguel is 25 years old, has low financial health, a long time horizon and a high risk tolerance. Which asset allocation would you recommend? A.) 85% stocks and 15% bonds/cash equivalents. B.) 60% stocks and 40% bonds/cash equivalents. C.) 40% stocks and 60% bonds/cash equivalents. D.) 20% stocks and 80% bonds/cash equivalents.

A.) 85% stocks and 15% bonds/cash equivalents.

What is diversification? A.) An investment strategy that mixes a wide variety of investments from different categories within a portfolio. B.) How comfortable you feel taking the risk of losing your money. C.) An investment strategy used to analyze company stocks based on their financial statements. D.) How long you plan to keep your investments in your portfolio.

A.) An investment strategy that mixes a wide variety of investments from different categories within a portfolio.

A "Limit Buy" order is usually set with a limit price... A.) Below the current market price B.) Above the current market price C.) At the current market price D.) A set percentage above the current market price

A.) Below the current market price

Investors with a ______ risk tolerance may have a long time horizon and are usually looking to maximize their returns in the stock market. A.) High B.) Medium C.) Low D.) Flat

A.) High

As the price of stock goes up, the supply... A.) Increases B.) Decreases C.) Depends on the Demand

A.) Increases

Which of the following is the broadest category when searching? A.) Sector B.) Industry C.) Market D.) Company Size

A.) Sector

A "Stop" order is most likely to be used by... A.) Someone trying to protect against loss B.) Someone trading mutual funds C.) A "Buy and Hold" investor D.) Someone trying to maximize gains

A.) Someone trying to protect against loss

When there are events that promote economic growth in the news, what usually happens to stock prices? A.) Stock prices in all industries go up B.) Stock prices in all industries go down C.) Stock prices go up in some industries and down in other industries D.) Not enough information

A.) Stock prices in all industries go up

From 2010 through 2021, which of the following investments had the highest returns? A.) Stocks B.) Gold C.) Residential Property D.) Savings Accounts

A.) Stocks

Which financial market is the stock market a part of? A.) The capital market B.) The money market C.) The derivatives market D.) The foreign exchange market

A.) The capital market

All of the transactions that occur in connected markets across the economies of different countries create... A.) The global economy B.) Your country's economy C.) A goods and services market D.) The stock market

A.) The global economy

What is the "Bid"? A.) The highest price a buyer would be willing to pay B.) The lowest price an owner is willing to take to sell C.) The equilibrium price where price and quantity match

A.) The highest price a buyer would be willing to pay

A "Trough" in the business cycle refers to... A.) The low point before it starts increasing B.) The high point before it starts falling C.) The period of growth D.) The period of contraction

A.) The low point before it starts increasing

How long you plan to keep your investments in your portfolio refers to: A.) Time horizon B.) Asset allocation C.) Personal financial health D.) Risk tolerance

A.) Time horizon

Which of the following investments would be considered "Risk Free" by investors? A.) Treasuries B.) Corporate Bonds C.) Municipal Bonds D.) Foreign Exchange

A.) Treasuries

Which investor champions "Buy and Hold"? A.) Warren Buffett B.) Peter Lynch C.) Mark Cuban D.) Elon Musk

A.) Warren Buffett

What is an IPO? A.) When a company first sells shares of stock to the public B.) When the government creates shares on a Stock Exchange C.) A new Apple product D.) When a company gets angry at its shareholders and has a meeting

A.) When a company first sells shares of stock to the public

You have a 50% margin account, and buy one share of a stock currently trading at $100. What is your maximum loss? A.) $50 B.) $100 C.) $200 D.) Unlimited

B.) $100

A ticker symbol in the United States consists of... A.) 1-5 letters or numbers B.) 1-5 letters C.) 1-5 numbers D.) 1-5 of any character

B.) 1-5 letters

How many stocks are in the Dow Jones Industrial Average? A.) 10 B.) 30 C.) 100 D.) 500

B.) 30

The business cycle refers to... A.) How a single business is profitable some times of the year, and struggles other times of the year B.) An economic phenomenon when the markets as a whole expand and contract C.) A cycle of bull and bear markets caused by bubbles D.) Are not something you can control, so not worth worrying about

B.) An economic phenomenon when the markets as a whole expand and contract

A "Market Order" is... A.) An order sent to the market B.) An order sent to execute at whatever price is current C.) An order set to execute if the price falls to a certain level D.) An order set to execute if the price rises above a certain level

B.) An order sent to execute at whatever price is current

If you currently own a stock, the ____ is the price you would be willing to sell it for A.) Bid B.) Ask C.) Equilibrium D.) IPO

B.) Ask

A "GTD" order will expire.... A.) At the end of the current trading day B.) At the end of a specified date C.) After about 3 months, depending on the brokerage D.) Never

B.) At the end of a specified date

"Treasuries" are a type of... A.) Stock B.) Bond C.) Mutual Fund D.) CD

B.) Bond

Which of the following is a "Debt Instrument"? A.) Stock B.) Bond C.) Mutual Fund D.) ETF

B.) Bond

Which of the following is NOT an equity investment? A.) Stocks B.) Bonds C.) Mutual Funds D.) ETFs

B.) Bonds

Trading "On Margin" refers to... A.) Trading stocks over-the-counter B.) Borrowing money from your broker to invest C.) Trading a very small amount D.) Trading in a brokerage account

B.) Borrowing money from your broker to invest

If you "Short" a stock, how do you close your position? A.) Buy B.) Cover C.) Limit D.) Stop

B.) Cover

If you set a "Limit Buy" order at $50, your order will execute... A.) If the price rises above $50 B.) If the price falls below $50 C.) Immediately, if the current price is above $50 D.) Both B and C

B.) If the price falls below $50

Which of the following is a disadvantage of going public? A.) Ability to raise a lot of money B.) Losing some control over company decisions C.) Gaining public exposure for your company D.) Ability to attract many investors

B.) Losing some control over company decisions

What does a broker do? A.) Provides the most up-to-date prices on investments in the market B.) Makes investment trades for their clients C.) Reports news on the financial markets D.) Helps companies raise money in the financial market

B.) Makes investment trades for their clients

Which of the following statements is TRUE? A.) Mutual funds trade directly on stock exchanges while exchange-traded funds are purchased from a financial broker. B.) Mutual funds are actively managed while index funds are passively managed. C.) Index funds track major market indexes while exchange-traded funds do not. D.) Mutual funds invest exclusively in stocks while index funds do not.

B.) Mutual funds are actively managed while index funds are passively managed.

Which investor champions "Buy What You Know"? A.) Warren Buffett B.) Peter Lynch C.) Mark Cuban D.) Elon Musk

B.) Peter Lynch

What does a "Coupon Rate" refer to? A.) The discount on a bond when you buy for less than $1000 B.) The interest rate a bond pays C.) The dollar value payment you receive from a bond D.) The expiration date of a bond

B.) The interest rate a bond pays

What is GDP (gross domestic product)? A.) An increase in prices of goods and services across many markets in the economy. B.) The total value of all the finished goods and services produced in a country over a certain period of time. C.) The percentage of people in a country who currently don't have jobs but are looking for work. D.) A measurement of the average change in prices of goods sold by a country's producers.

B.) The total value of all the finished goods and services produced in a country over a certain period of time.

Which of the following statements about stocks is FALSE? A.) Stocks represent a share of ownership in a company. B.) When you buy stocks, you get a say in shareholder meetings. C.) Stocks pay out interest annually. D.) Stocks are considered relatively risky compared to bonds.

B.) When you buy stocks, you get a say in shareholder meetings.

In order to implement expansionary policy, the Central Bank and government must _____ interest rates, ______ government spending, and _____ taxes. A.) increase, increase, decrease B.) increase, decrease, decrease C.) decrease, increase, decrease D.) decrease, decrease, increase

B.) increase, decrease, decrease