Finance 223 11-13

if a business fails (business failure risk), your stock investment is typically worth:

$0

in the case of a 2-for-1 stock split, the stockholder now owns

2 times the number of shares previously owned

a good rule of thumb is to limit consumer CREDIT payments to

20 percent AFTER-tax income

A licensed individual who buys or sells securities for clients is oftentimes called an

Account executive or stockbroker

When calculating total return on stock, you must consider which of the following items?

Amounts of dividends earned Price share at time of sale Price of share at time of purchase

Dividends are paid out of profits and must be approved by the:

Corporation's board of directors

Price-earnings (PE) ratio equal price per share divided by:

Earnings per share

A stock is being put up for sale on June 11. On May 21, the Board of Directors declared that the dividend will be paid to stockholders of record on June 13. the stock is selling:

Ex-dividend

The time period during which a stock trades "without dividend" and the seller, not the buyer is entitled to the dividend payment is called the:

Ex-dividend period

Which of the following statements is not a factor to consider in choosing different investments?

If you invest in high quality stocks, there is no need to monitor your investments.

A financial firm that assists corporations in raising funds, usually by helping to sell new security issues is called an

Investment bank

is an electronic marketplace

Nasdaq

The price of a share of stock divided by the corporation's earnings per share of stock is called the:

Price-earnings ratio

True or False: When selling a stock, profit or loss equals the net selling price less the adjusted cost (purchase price plus fees)

True

which type of firm typically does not pay a dividend?

a fast-growing firm

Which of the following statements regarding asset allocation is not true?

age and the time factor have little to do with asset allocation.

average returns on stock since the end of WWII is:

almost 10 percent

which of the following would not be a good choice when investing for a predictable source of income?

any common stock

certificates of deposit, mutual funds, and real estate

are generally not considered liquid.

a stock selling dividend will be trading:

at a lower price

a typical emergency fun is:

at least 3 months of living expenses

a growth company has:

better than average earnings potential

a stock issued by a large, stable company; usually pay dividends

blue chip

Along with the actual credit card, what other features of the card would provide funds in the case of an emergency?

cash advances

what are three safe investments?

certificates of deposit, selected mutual funds, and government bonds.

the most obvious difference between full service and discount firms is the _______ they charge when you buy or sell stock and other securities

commissions

who elect the board of directors?

common stockholders

Ben is a father of three children who is concerned about his future career with his company. His investment choices will most likely be:

conservative, less risky

a 2-for-1 split will

cut the price per share in half

a stock that follows the business cycle of advances and declines in the economy

cyclical

as interest rates increase bond prices

decrease

if interest rates increase, the value of a bond will:

decrease

a stock that remains stable during economic decline

defensive

the potential return on an investment should be:

directly related to the risk assumed.

is the annual dividend amount divided by the stock's current price per share

dividend yield

companies choose to pay ________ to keep stockholders happy and prosperous

dividends

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

Earnings per share is equal to a corporation's _______ divided by the number of outstanding _______ of a firm's common stock.

earnings, shares

a company's website that can be viewed anytime is:

easily accessible

cash advances from credit cards can be used in the case of an

emergency

an amount of money that you obtain quickly in case of an immediate need is an

emergency fund

corporations do not have to repay the money obtained from

equity financing

True or False: Many people in today's economy choose CDs because of their high rates of return.

false

true or false: dividend payments are required from corporations.

false

a stock issued by a corporation that has the potential of earning profits above the average of firms in the economy

growth

credit lines and credit cards:

have a maximum dollar limit.

What is a factor you do not want to consider when choosing different investments?

if you invest in high quality stocks, there is no need to monitor your investments.

as interest rates decrease bond prices

increase

what is not a recommended step for surviving a financial crisis?

increase spending

What type of risk associated with preferred stocks or government or corporate bonds is the result of changes in the interest rates of the economy?

interest rate risk

most companies pay dividends to:

keep investors happy

Which of the following investments are included in a diversified portfolio?

large company stocks small company stocks bonds cash

a short-term loan is approved before the money is actually needed is a

line of credit

is a short-term loan that is approved before money is actually needed:

line of credit

The stock market does not always allow you to regain the value invested; even though you may sell your investment, it is not considered

liquid

saving and interest-bearing checking accounts are considered more ________ because the money can be converted into cash quickly.

liquid

the ability to buy or sell an investment quickly without substantially affecting the investments value is called:

liquidity

saving money for retirement would be considered a

long-term goal

low risk = medium risk = high risk =

low return medium potential return high potential return

Which of the following is not true about the time value of money affecting investments?

many investors today seek higher returns by investing in certificates of deposit

Fluctuation of prices of securities due to the behaviors of investors in the marketplace is known as:

market risk

"I want to make $300 quarterly for the next three years." This goal is not only specific but because it mentions a number, it is also:

measurable

information on companies' websites is likely to be:

more up to date than printed materials

a corporation is under:

no legal obligation to buy back shares from the public

changes in the market price for stocks are ______________ to the financial health of the company.

not always related.

Which of the following are generally the most predictable sources of income?

passbook savings accounts certificates of deposit U.S. government securities

a growth company generally:

pays little to no dividend

A stock that typically trades for less than $5 per share (or in some cases, less than $1 per share) and has a small amount of capitalization is called a

penny stock

which category of stockholder receives dividends first:

preferred

A market in which an investor purchases financial securities through an investment bank or other representative from the issuer of the securities is called a

primary market

which type of dividend payment is very unusual?

property

A legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individuals or individual is called a:

proxy

For stockholders, dividends are typically paid on a ________ basis if they are paid

quarterly

the buying power of a consumer will be reduced if

rate of return is less than inflation

A date on which a stockholder must be registered on the corporation's books in order to receive dividend payments is called what?

record date

if future earnings expectation increase, the price of the stock will:

rise

in an investment means a measure of uncertainty about an outcome

risk

Cash, CDs, government bonds, and money market mutual funds are all considered very ________ investments and are on level one of the investment pyramids.

safe

government and corporate bonds are often seen as ________ investments than stocks:

safer

in an investment means minimal risk of loss

safety

tom wants an investment with a minimal chance of loss. he is mainly concerned about the investment's:

safety

which of the following is a more liquid investment?

savings account

during the ex-dividend time period, the _______ of the stock is entitled to the declared dividend payment.

seller

for stock investors, profit =

selling price minus purchase

Earnings per share equals after-tax income divided by the number of ________ outstanding

shares

corporate dividends for common stock may take the form of cash additional __________ or company _________

shares, products

useful investment foals are ________ and ________

specific, measurable

a high-risk investment made in hope of earning a relatively large profit in a short time is called a:

speculative investment

is an event in which the shares of stock owned by existing stockholders are divided into a larger or smaller number of shares

stock split

When investing in stocks, it is important to remember that:

stocks do not always increase in value

Which of the following is NOT a factor to consider when choosing different investments?

tax consequences of selling investments

Mutual funds are not included in the list of typical investments because

they invest in the assets on the list.

Any time you invest in stocks, corporate bonds, and mutual funds that invest in stocks, you assume business failure risk.

true

Liquidity is the ability to buy or sell an investment quickly without substantially affecting the investment's value.

true

True or False: As interest rates rise, bonds prices generally decline.

true

true or false: rapidly growing forms typically pay little or no dividends.

true

among other factors, a person's priorities, age, and personal ___________ affect his or her investment goals.

values

when looking at investment you should first ask yourself?

what is important to you and what do you value?

if you are a young married couple with no children, you will most likely choose investments:

with higher risks

What is not a factor in determining the percentage of your investments that should be invested in each asset class?

your income