Fin ch.8

Debra is working with a commissioned-based financial planner. The financial planner is recommending that Debra purchase shares in a mutual fund the charges a 8 percent commission. If Debra invests $12000 how much will the advisor be paid?

$960

If you, as an investor, wanted to guarantee purchasing a stock at a specific price or better, which type of order would you use?

A limit order.

Ramos is an aggressive investor and likes to win at everything. He knows that it is impossible to win or beat the averages all of the time, but he wants to try! Given his attitude, Ramos should select what type of investment if his number one goal is to beat the market?

Actively managed mutual fund.

Lyle considers himself a gambler. He likes to do research on individual stocks, market sectors, and the stock market in general. He likes to buy and sell based on breaking news. Lyle primarily invests in individual stocks and industry specific mutual funds (i.e., healthcare mutual funds or manufacturing mutual funds). He rarely buys ETFs. What specific advantage of ETFs over mutual funds is Lyle missing out on?

Both diversified portfolio and the ability to buy and sell at any time curing the trading day.

As a novice investor, Laura is concerned about fees. She has heard stories of investors who have lost thousands of dollars in fees over time. She wants to invest in investments that generally have the lowest fees. Given her desire, Laura should focus on purchasing:

Both index mutual funds and exchange-traded funds.

Given a high tolerance for risk and a desire to invest internationally, investment in which type of countries could represent good investment opportunities?

Countries with strong GDP growth, oversight, and legal structure.

Which of the following is/are reasons why investors might choose to invest in mutual funds?

Diversification, professional management, and to pool capital with other investors.

When you own stock in a company, you are:

Entitled to a share of the firm's profits.

Which of the following is true regarding brokerage accounts: I. Full-service brokerage firms provide guidance to investors. II. Brokerage accounts are prefunded arrangements between an investor and a broker-dealer. III. Investors who want to own stocks and bonds do so, almost exclusively, via brokerage accounts. IV. A self-directed brokerage account is appropriate for an investor who does not want or doesn't need investment guidance.

I, II, III and IV.

To have equity in a company means that: I. You have lent money to the firm. II. You receive dividends when distributed by the firm. III. You have an ownership interest in the firm.

II and III only.

An advantage of investing internationally is:

Low correlation between U.S. stocks and international stock which reduces investment risk.

Which of the following best describes an index mutual fund?

Passively managed funds designed to mimic a specific market.

Volatility refers to:

how wildly returns fluctuate over time.