Final Exam (9,10,11,12,14,15) Quiz Questions

The firm will pay an annual dividend this year of $2 per share. The current market price of the stock is $40.00 per share. The book value of this stock is $24.00 per share. The earnings per share for this firm is $5.75. What is the current dividend yield of this stock?

5%

A(n) ________ is a pension plan in which you and your employer or your employer alone contribute funds directly to a retirement account set aside specifically for you.

defined-contribution plan

ABC corporation is selling additional shares of common stock. These are new shares of stock, and have never been sold or traded previously. The selling of these shares would take place in the ____ market

primary

A group of 100 shares of common stocks is referred to as a

round lot

You are participating in a pension plan where the company's contributions vary from year to year, depending on the firm's performance. This is an example of a(n)

profit-sharing plan.

The book value of a company is calculated by

subtracting the value of all the firm's liabilities from the book value of its assets.

A typical young investor should have most of their retirement money allocated in common stocks

True

The size of your social security benefits are determined by your number of years of earnings, your average level of earnings, and your adjustment for inflation

True

The trade-off for mutual fund diversification is lower-than-market performance.

True

Your insurance's copayment and deductible are the expenses that the insured must pay before the insurance company will pay any benefits

True

Why does it cost so much to trade with a full service broker

All of the above

You purchased 100 shares of Quantex at $150 per share for a total investment of $15,000. After your purchase the stock had a 3 for 1 split. How many shares do you now own and how much is your original investment now worth?

300 shares and $15,000

For your investment program, you have occasionally been holding a few stocks that you purchased from various brokers. Based on this, which advantages of mutual funds would be appealing to you?

A B & C

Which of the following is a disadvantage to mutual fund investing?

All of the above

Which of the following is a problem associated with many defined-benefits programs?

All of the above

Which of the following benefits is not provided by Social Security?

Education

Which of the following purchase orders indicates that you want to buy or sell immediately?

Market order

Suppose that you wanted to purchase insurance that is sold by a private insurance company that will help bridge the gap in your Medicare coverage. You would purchase what type of insurance?

Medigap insurance

What is the purpose of a margin account and using margin to purchase stocks?

Only B & C

You purchased some stock last month for $50 per share. Today the stock closed at $80 per share. You would like to protect the profit that you have made on this stock but you really don't want to sell it in case it continues to rise in price. What should you do?

Place a stop-loss order on this stock

Cash-value insurance is any policy that provides both a death benefit and an opportunity to accumulate cash value

T

If you're going to make informed investment decisions, you have to seek investment information, read it, and interpret it

T

Life insurance is not meant to benefit you, its purpose is to protect others in the event of your death

T

Why are so many people without disability insurance?

The price is prohibitive for most people

If you are too conservative with your investments, they may not keep up with inflation

True

Long-term capital gains have favorable tax treatment over earned income

True

One of the drawbacks to defined-benefit plans are their lack of portability, meaning that if you leave the company the value of the pension is not likely to go with you.

True

You are considering the need for insurance. You desire a policy that provides permanent protection, has a fixed premium, and provides a fixed death benefit. What type of policy would you purchase?

Whole life insurance

You have just purchased 10 shares of a stock selling at $50 per share. Since that time, the company was found to be in violation of several environmental laws and has several major lawsuits outstanding. Which of the following statements is most correct?

You could lose up to your $500 investment.

Which of the following statements is true regarding social security retirement benefits?

all of the above

Investors with _______ accounts pay in full for their security purchases

cash

Your next-door neighbor, a kind, elderly lady just discovered that her stock account has been excessively traded in an inappropriate manner, mainly to generate excess commissions. This is an example of

churning

Roberta Cartwright puts money each month into a mutual fund that has very few controls; in that, the managers can invest in whatever they want because this type of fund is not regulated by the SEC. Roberta has a(n) ________ fund.

hedge

A(n) ________ is a mutual fund company that has the ability to issue as many shares as investors are willing to purchase.

open-end mutual fund

An employer-sponsored medical plan that allows each employee to have pretax earnings deposited into a specially designated account for the purposes of paying specific types of expenses is called a

flexible spending account

Social Security is a mandatory insurance program that provides a base level of protection for all of the following occurrences except one. Choose that one.

job loss

A unit investment trust usually invests in ________ and an REIT always invests in ________.

municipal bonds; real estate

Which of the following funds would be the most appropriate investment for the average small investor?

no-load open -end fund

The waiting or elimination period on one's disability insurance refers to the period after the disability during which no benefits can occur. The waiting period is equivalent to

the deductible for one's health care policy

Frank is considering a new job. However he is concerned about his pension fund. He knows that ________ which is the requirement that he must work for his firm for a specified period of time prior to gaining ownership of the retirement contributions made by his employer has to be met first.

vesting