finance chapter 13 -19
Blank 1: mutual
A(n) fund is an investment company that pools the money from many investors to invest in a variety of securities.
Level 4
Based upon the image shown of the investment pyramid, what level would gold bars be included? Gold is a commodity.
Blank 1: liquid
Savings and checking accounts are considered more because the money can be converted into cash quickly.
safety
Tom wants an investment with a minimal chance of loss. He is mainly concerned about the investment's
True Reason: Correct. Changes in investment prices due to investors reacting to world and other events is called market risk.
True or false: Market risk is the fluctuation of stock and bond prices due to the behaviors of investors in the marketplace.
True Reason: Correct. Keeping a close watch on investments will help you to see how they are performing.
True or false: Monitoring is the process of keeping track of your investments and following their progress.
dividend
A distribution of money, stock, or other property that a corporation pays to stockholders is called a Blank______.
20% of after-tax income. Reason: Correct. A good rule of thumb is to limit consumer credit payments to no more than 20% of your net (after-tax) income.
A good rule of thumb is to limit consumer credit payments to:
line of credit.
A short-term loan that is approved before the money is actually needed is a(n):
Blank 1: emergency
A(n) fund is an amount of money you can obtain quickly in case of an immediate need. This is a one-word answer.
Blank 1: values or goals
Among other factors, a person's priorities, age, and affect his or her investment goals.
emergency fund
An amount of your money that you obtain quickly in case of an immediate need is a(n)
mutual fund
An investment company that pools the money from many investors to invest in a variety of securities is called a Blank______.
they have time to make it up.
Another factor affecting investing is your age. Younger investors can afford to invest a larger percentage in growth stocks because if their investment fails:
financing building condition taxes
As an investor, you want to ask your real estate agent about which of the following?
Level 3
Based upon the image shown of the investment pyramid, what level would owning an apartment building be included?
are not considered liquid
Certificates of deposit, real estate, and collectible antiques Blank______.
Low risk matches Potentially low returns Medium risk matches Potentially medium returns High risk matches Potentially high returns
Drag and drop the potential returns on investment against the corresponding level of risk assumed by the investor.
preferred stocks corporate bonds municipal bonds
For investment income, which of the following would be good choices?
Blank 1: high Blank 2: low
Government bonds are considered a(n) safety, risk, investment.
Blank 1: decrease
If interest rates for new comparable bonds increase, the value of a bond will
with higher risks
If you are a young married couple with no children, you will most likely choose investments
Blank 1: emergency
In times of financial crisis, consumers may need a larger than usual fund.
reduce spending. know what they owe. consider converting investments to cash.
In times of financial crisis, consumers should:
Blank 1: prices, cost, or costs
Inflation is the rise in the general level of
know where to begin your search for current information.
It is also important to keep records of research done so that when it is time to reevaluate an existing investment, you will:
Blank 1: credit
Line of is a short-term loan that is approved before money is actually needed.
increases in value every year
Many beginning investors believe that real estate is an investment that Blank______.
interest rate decreases matches Choice bond prices increase interest rate increases matches Choice bond prices decrease
Match interest rates and the value of bonds.
growth company matches Choice typically no dividend nongrowth company matches Choice better chance of receiving a dividend
Match these company types with potential dividends.
equity capital
Money that a business obtains from its owners is called Blank______.
Blank 1: 6,000 or 6000
Mr. Jones wants to establish an emergency fund. His living expenses for his family are $2,000 per month. The minimum Mr. Jones should have in his emergency fund is $
$5,400 Reason: Correct. The minimum should be 3 months' living expenses. $1,800×3 = $5,400.
Mr. Smith wants to establish an emergency fund. His living expenses for his family are $1,800 per month. What is the minimum Mr. Smith should have in his emergency fund?
conservative; speculative
Mutual funds range from very Blank______ to very Blank______.
Blank 1: diversification, diversifying, or diversity
People choose mutual funds because they invest in many different investments at one time. This is known as .
dividends before common stockholders.
Preferred stockholders receive:
establishing goals
The first step in investing is
Blank 1: investing
The first step in is establishing investment goals.
borrowed money
The maturity date is the date on which the entity repays the Blank______.
records of fees or commissions payed records of income (dividends, interest payments) records of dollar amount of investments
The minimum recordkeeping requirements consist of which of the following?
asset allocation
The process of spreading your assets among several different types of investments to lessen risk is called Blank______.
Blank 1: return or interest
The rate of can vary in percentage, yet every percent greater makes a significant impact on future value.
Blank 1: value, worth, or safety
The risk associated with bad news that a company may bring to the public is the risk in decreased .
business failure risk.
The risk that the company you are investing in might go under is called:
True
True or false: Asset allocation or diversification is the process of spreading your assets among several different types of investments.
False Reason: Correct. Corporations can choose to pay dividends or to not pay them. If they pay dividends one year, they are not obligated to continue paying them in the future.
True or false: Corporations are under a legal obligation to pay dividends.
True Reason: Correct. Changes in interest rates can lead to changes in prices of investments, earnings on savings, and the cost of borrowing money. This is interest rate risk.
True or false: Interest rate risk is the result of changes in the interest rates in the economy.
False Reason: Correct. Speculative investments are high-risk investments.
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 Reason: Correct. The less time you have to invest, the more advantageous it is to invest in short-term government bonds, highly rated corporate bonds, or certificates of deposits.
True or false: The less time you have to let your investments work, the more advantageous it is to invest in stocks rather than short-term government bonds and certificates of deposit.
Blank 1: stocks or stock Blank 2: savings or saving
Typical returns are higher for and mutual funds which offer high potential returns compared to CDs or accounts.
gemstones precious metals collectibles
Which of the following have little chance of providing a predictable income?
bonds
Which of the following investments is a loan to a government or corporation?
savings account Reason: Correct. Checking and savings accounts are very liquid because you can get cash by writing a check or withdrawing money from your savings account.
Which of the following is a more liquid investment?
options commodities precious metals
Which of the following would be considered speculative investments?
just any common stock
Which of the following would not be a good choice when investing for investment income?
Blank 1: three or 3 Blank 2: five or 5
Year-to-year real estate values nationally increase to % on average.
bond ladder.
A strategy where investors divide their investment dollars among bonds that mature at regular intervals in order to balance risk and return is called a(n):
directly related to the risk assumed. Reason: Correct. The potential return on any investment should be directly related to the risk the investor assumes.
The potential return on an investment should be:
price-earnings ratio
The price of a share of stock divided by the corporation's earnings per share of stock is called Blank__
price-earnings ratio
The price of a share of stock divided by the corporation's earnings per share of stock is called Blank___
$860.00
The price was quoted as 86. The face value is $1,000. What is the market price or value of the bond?
$910
The price was quoted as 91. The face value was $1,000. What is the current market value or price?
conserving principal. long-term growth. providing income.
The primary objectives of a balanced fund are:
providing income. long-term growth. conserving principal.
The primary objectives of a balanced fund are:
measurable
"I want to make $300 quarterly for the next three years." This goal is not only specific but is
Blank 1: 1 Blank 2: 5
A contingent deferred sales load can range from % to % of withdrawals depending on how long you own the fund before making the withdrawal.
trustee
A financially independent firm that acts as a bondholder's representative is called a(n) Blank______.
Blank 1: interest
Federal agency debt issues have a slightly higher risk than government securities therefore a slightly higher rate or rate of return.
Blank 1: state Blank 2: local
Municipal bonds are used to finance ongoing activities of the and governments.
toll roads schools airports
Municipal bonds are used to finance which of the following?
2
The management fee of a mutual fund can range between 0.5% and Blank______% per year of a fund's total assets.
Blank 1: book Blank 2: value
The market-to-book ratio is computed as the current market value per share of stock divided by the per share of stock.
30 years.
The maturity on a treasury bond is:
Blank 1: preferred
There are two basic types of stock: common stock and stock.
$100
What is the minimum unit for a treasury bill?
stocks
Which type of investment often returns more than other investment alternatives like bonds, yet it is also more risky?
True or false: Asset allocation or diversification is the process of spreading your assets among several different types of investments.
true
Blank 1: registered
A bond is registered in the owner's name.
Blank 1: outside
A true international fund invests only in stocks of companies located the United States.
Blank 1: percentage, %, or percent
Bond quotations are given as a of face value.
short term, intermediate term, and long term
Bonds are classified as which of the following?
Blank 1: B
Class mutual funds have a commission charge when the money is withdrawn during the first five years.
price-earnings ratios earnings per share
Earning estimates exist to provide estimates of which of the following?
know what they owe. consider converting investments to cash. reduce spending.
In times of financial crisis, consumers should:
value
One type of risk that investors in stock take is a decrease in
Blank 1: buy or purchase Blank 2: sell
Options are the right to or a stock at a predetermined price during a specified period of time.
two sources of return.
Over the entire life of the bond, there will be:
Blank 1: interest Blank 2: face, original, or principal
Over the life of a bond there are two sources of return: received from the purchase date until maturity and the repayment of the value of the bond.
liquidity
Real estate is considered to have a low Blank______ factor.
Blank 1: brokerage or investment
Selling short is selling a stock that has been borrowed from a(n) firm and must be replaced at a later date.
10.6%
Solve for yield to maturity. Annual interest = $30.00, face value = $1,200, market value = $880, number of periods = 4.
Blank 1: payroll Blank 2: reinvestment or withdrawal
Some of the services offered by open-end mutual funds include investing through deduction programs and automatic programs.
risky, yet high returns
Which is not a reason why investors choose bond funds?
dividend income
Which of the following is not a reason why investors purchase corporate bonds?
the Federal Reserve website
Which of the following is not a source of information about mutual funds on the internet?
Go to your local bank.
Which of the following is not a way to obtain an annual report?
Dividends may be omitted by board of directors.
Which of the following is not an advantage of investing in preferred stocks?
(market value of portfolio less liabilities)/number of shares outstanding Reason: Correct. The formula begins with market value of assets, not cost of assets. Then liabilities are subtracted and the total is divided by the number of shares outstanding.
Which of the following is the correct formula for NAV?
Shares are issued and redeemed by the investment company at the request of investors.
Which of the following is true about an open-end mutual fund?
pay little or no dividend.
A growth company generally:
conservative, less risky Reason: His investment choices will most likely be conservative, so he will worry less about providing for his family.
Ben is a father of three children who is concerned about his future career with his company. His investment choices will most likely be Blank
market risk
Fluctuation of prices due to the behaviors of investors in the marketplace is known as
Blank 1: liquid
Savings and checking accounts are considered more Blank because the money can be converted into cash quickly.
Blank 1: larger, greater, bigger, higher, high, large, or big
The younger you are as an investor, the more likely you are to invest a portion in growth investments.
accurate recordkeeping
This activity helps you spot opportunities to maximize profits or reduce losses when you sell your investments:
Blank 1: written Blank 2: measurable or measured
Useful investment goals are , specific and
Blank 1: convertible Blank 2: stock
A bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common .
Blank 1: risk
A bond ladder is where an investor seeks to balance and return
convertible bond Reason: Correct. This is the definition of a convertible bond.
A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock is called a Blank_____
registered bond
A bond that is registered in the owner's name by the issuing company is called a Blank__
revenue bond
A bond that is repaid from the income generated by the project it is designed to finance is called a Blank______.
total return
A calculation that includes the annual dollar amount of income as well as any increase or decrease in the original purchase price of the investment is called Blank______.
Blank 1: before Blank 2: maturity
A call feature allows the corporation to buy outstanding bonds from current bondholders the date.
Blank 1: deferred Blank 2: sales
A contingent load is a 1% to 5% charge that shareholders pay when they withdraw their investment from a mutual fund.
Blank 1: interest
A corporate bond is a corporation's written pledge to repay a specified amount of money along with .
mortgage bond.
A corporate bond secured by various assets of the issuing firm is called a:
Blank 1: creditors
A corporation fails to make interest payments; therefore debenture bondholders become general , much like the firm's suppliers.
earnings per share
A corporation's earnings divided by the number of outstanding shares of a firm's common stock is called Blank______.
corporate bond
A corporation's written pledge to repay a specified amount of money with interest is called a Blank______
Blank 1: short
A day trader is an individual who buys and then later sells stock and other securities in a very period of time.
Blank 1: subordinated or subordinate
A debenture bond is an unsecured bond that gives bondholders a claim secondary to that of other debenture bondholders.
municipal bond
A debt security issued by a state or local government is called a Blank____
Blank 1: stockholders, shareholders, investors, or owners
A dividend payout is the percentage of a firm's earnings paid to in cash.
price per share
A dividend yield is the annual dollar amount of income generated by an investment divided by the investment's current Blank______.
call feature.
A feature that allows the corporation to call in or buy outstanding bonds from current bondholders before the maturity date is a:
Blank 1: taxing, tax, or taxation
A general obligation bond is a bond backed by the full faith, credit, and unlimited power of the government that issued it.
Blank 1: debenture
A is a corporate bond that is backed only by the reputation of the issuing company.
proxy
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 Blank____
8 1/2
A load fund investor pays as much as Blank______% commission every time shares are purchased
investment-grade corporate bonds maturing in 10 years or more.
A long-term corporate bond fund usually invests in:
dollar cost averaging.
A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals is called:
a commission is incurred both upon the purchase and the sale of shares.
A major disadvantage of investing in exchange-traded funds is:
can be an open-end or closed-end fund.
A managed mutual fund:
primary market.
A market in which an investor purchases financial securities via an investment bank or other representative from the issuer of the securities is called a(n):
securities exchange.
A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n):
beta
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:
Blank 1: assets Blank 2: firm, company, or corporation
A mortgage bond is a corporate bond secured by various of the issuing .
general obligation bond.
A municipal bond backed by the full faith, credit, and unlimited taxing power of the government that issued it is called a:
Blank 1: state Blank 2: government
A municipal bond is a debt security issued by a or local municipal .
Blank 1: fund
A mutual is an investment company that pools investors' money to invest in various securities.
Blank 1: market
A order is a request to buy or sell a stock at the current price.
the library.
A place to gather information regarding investments that is free to the public and can be accessed during normal business hours is:
direct investment plan. Reason: Correct. A direct investment plan allows you to purchase stock directly from a corporation without having to use an account executive or a brokerage firm.
A plan that allows stockholders to purchase stocks directly from a corporation without having to use an account executive or a brokerage firm is called:
79% of face value.
A price quote of 79 means
stock split Reason: Correct. This is the definition of a stock split.
A procedure in which the shares of stock owned by existing stockholders are divided into a larger (or smaller) number of shares is called a Blank______. Multiple choice question. division
limit order
A request to buy or sell a stock at a specified price is called a Blank_
limit order
A request to buy or sell a stock at a specified price is called a Blank______.
Blank 1: investors or individuals
A securities exchange is a marketplace where member brokers who represent , buy and sell securities.
growth
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?
Blank 1: primary
A(n) market is a market in which an investor purchases financial securities via an investment bank or other representative from the issuer of those securities.
Blank 1: additional, more, extra, or less
Accurate recordkeeping can help you decide if you want to invest funds in a particular investment.
technical analysis
An investment practice based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called Blank______.
Blank 1: fundamental
An investment practice that is based on the assumption that a stock's intrinsic or real value is determined by the company's future earnings is known as analysis.
efficient market hypothesis
An investment theory based on the assumption that stock price movements are purely random is called Blank______.
interest income.
An investor may choose not to convert their bond because they want to receive:
Blank 1: before
An investor should read a mutual fund prospectus completely investing.
subordinated debenture bond.
An unsecured bond that gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments, repayment, and assets is called a:
2% Reason: Correct. Annual dividend $1.65/Market value $78 =0.02 = 2%
Annual dividend is $1.65, and market value is $78. Solve for the dividend yield.
Blank 1: bond, note, or bonds
As the common stock value increases, so does the market value of the convertible . For this reason, along with the interest income combined with a potentially safer investment, many investors choose not to convert their investment. This is found in the discussion of types of bonds.
intermediate term
Bonds that are between 3 and 10 years to maturity are usually classified as Blank______.
Blank 1: liabilities
Book value is determined by deducting all from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.
Blank 1: economy or market
Business Week, Forbes, and Fortune magazines provide general news about the overall , and detailed financial information about specific corporations.
bonds
Business periodicals and federal agency publications are two additional sources of information that can be valuable when evaluating Blank______.
historical numbers.
Earnings per share and price-earnings ratios are based on:
Blank 1: world or globe
Global stock funds invest in stocks of companies throughout the , including the United States.
Blank 1: revenue or returns
Growth funds invest in companies expecting higher-than-average and earnings growth.
expecting higher-than-average revenue and earnings growth.
Growth funds invest in companies:
higher lower
If a bond is sold before maturity, the yield for the investor may be Blank______.
Blank 1: stock Blank 2: maturity
If a bondholder converts to common , the corporation no longer has to redeem the bond at the date.
$13.33 Reason: Correct. ($500 million − $100 million)/30 million shares
If a mutual fund's portfolio is valued at $500 million while there are liabilities of $100 million, what would be the NAV if there were 30 million shares outstanding?
Blank 1: preferred
If financial problems occur, a business will pay dividends to stockholders first.
Blank 1: price
Investors in aggressive growth funds experience large swings.
Blank 1: professional, portfolio, or fund
Investors often think they do not need to evaluate a mutual fund because each fund has a manager.
for a long term to enjoy high returns.
It is better to invest:
Blank 1: full Blank 2: service
Joanne has never invested before. John recommends a(n) brokerage firm to help her get started in investing.
When the NASDAQ stocks decrease, the value of Julie's investment mirrors the decrease.
Julie has invested in a mutual fund tied to the NASDAQ index. What relationship will her fund have with the index in terms of price fluctuation?
Blank 1: value
Large-cap stock funds invest in companies with $10 billion or more of total capitalization, and therefore they are likely to have less fluctuation in .
investment and economic information
Many radio and television stations broadcast Blank______ as part of their regular news programs.
conservative matches Choice lower betas growth stocks matches Choice higher betas
Match betas with the category of stocks.
blue chip matches Choice safest stock penny stock matches Choice typically less than one dollar growth stock matches Choice high earnings potential cyclical stock matches Choice follows patterns of the economy
Match stocks with their characteristic.
family
Most open-end funds provide their investors with the ability to change shares in one fund to another fund within the same Blank___
Blank 1: beta or betas
Most stocks have a measure of volatility, called , between 0.5 and 2.
0.5 and 2.0
Most stocks have betas between Blank______.
Blank 1: large
Mutual funds that invest in stocks of companies with a total capitalization of $10 billion or more are called -cap funds. This is found in the discussion of stock funds.
Blank 1: radio Blank 2: television or tv
Often listened to in a car and watched at home, and can be good sources to gather information on investments.
low interest rates.
One disadvantage of investing in U.S. treasuries is:
Blank 1: diversification, diversity, or variation
One of the major advantages of investing in mutual funds is because the fund manager is investing in many different stock and/or bonds.
Blank 1: mutual Blank 2: funds
People often buy when they lack enough money to diversify their investments among several stocks.
they have plenty of money to diversify on their own.
People often select mutual funds for all of these reasons except:
Blank 1: supply or micro Blank 2: demand or macro
Technical analysis is an investment practice based on the assumption that a stock's market value is determined by the forces of and in the stock market as a whole.
Blank 1: load
The "stated" advantage of paying the up-front charge for a mutual fund is because the salespeople will explain the advantages of the fund and make investment recommendations to suit your objectives.
dividends and stock value
The buy-and-hold technique increases value in what two ways?
Blank 1: taxes or tax
The consequences of must be considered when selling an investment.
Blank 1: prospectus
The corporations must disclose corporate earnings, assets, liabilities, products, or services and the qualifications of top management in a .
market-to-book ratio.
The current market value of one share of stock divided by the book value for one share of stock is called the:
high fees.
The disadvantage of investing in a fund of funds is:
face value
The dollar amount the bondholder will receive at the bond's maturity is called Blank______.
Blank 1: website
The easiest way to obtain an annual report is to go to the corporation's . This method allows you access to information any time that is convenient for you.
Blank 1: beta
The for the S&P 500 is equal to 1.
the corporation
The investor relations department of a company can provide a wealth of information about Blank______.
closed-end funds are actively managed by portfolio managers, while exchange-traded funds are invested in the stocks of a certain index.
The key difference between exchange-traded and closed-end funds is:
time
The key element to investing is Blank______.
income to shareholders.
The major objective of equity income funds is to provide:
Blank 1: 2 or two
The management fee of a mutual fund can range between 0.5% and % per year of a fund's total assets.
records of income (dividends, interest payments) records of fees or commissions payed records of dollar amount of investments
The minimum recordkeeping requirements consist of which of the following?
Blank 1: time
The more an investment has to work, the more money it will likely accumulate.
if the bond is converted, it no longer has to be redeemed at maturity. interest rates are lower. convertible feature attracts investors who are interested in speculative gain
The three advantages that corporations have by issuing convertible bonds are:
original purchase
The total return is a calculation that includes the annual dollar amount of income as well as any increase or decrease from the Blank______ price of the investment.
federal agency debt instruments
There may be differences in how interest is paid when comparing Treasury securities and
lower commission with online trades. research information online. price information.
Three ways that the internet can help you invest in bonds are:
Blank 1: higher, bigger, greater, or larger
Treasury bonds generally have a interest rate than T-notes or T-bills because they have a longer maturity.
True Reason: Correct. 12b-1 fees help to defray costs of advertising and marketing a mutual fund and commissions paid to brokers who sell mutual funds.
True or false: A 12b-1 fee helps cover the costs of distributing, marketing, and commissions paid to the brokers of a mutual fund.
False Reason: Correct. In a direct investment plan, investors purchase stock directly from the corporation without using a broker.
True or false: A direct investment plan is a plan where stockholders purchase stocks from a stockbroker. True false question.True
True Reason: Correct. There is no front- or back-end charge on a no-load fund, but there are administrative fees.
True or false: A no-load fund does not have a sales charge.
True Reason: Correct. Account executives or stockbrokers are licensed and buy and sell securities for clients.
True or false: An account executive is also called a stockbroker.
False Reason: Correct. Index funds typically have lower expense ratios compared to managed funds.
True or false: An index fund usually has a very high expense ratio.
True Reason: Correct. A mutual fund's prospectus contains all significant details about a mutual fund, including all its costs.
True or false: An investment company's prospectus contains details relating to management fees, sales fees, 12b-1 fees, and other expenses.
True Reason: Correct. Failure of businesses you invest in is always a risk.
True or false: Any time you invest in stocks, corporate bonds, and mutual funds that invest in stocks, you assume business failure risk.
False Reason: Correct. The objectives of balance funds are conserving principal, providing income, and long-term growth.
True or false: Balanced funds invest in both stocks and bonds with the primary objective of aggressive short-term growth.
False Reason: Correct. With closed-end funds, no additional shares are issued by the company. Shares are purchased on the stock exchange.
True or false: To purchase a closed-end mutual fund, you would purchase shares directly from the mutual fund company at any time.
Blank 1: interest, return, or growth
U.S. treasuries are a very low-risk investment that many investors use to allocate their investments and bring their overall risk down. Because of this low risk, there is also a low rate.
professional advisory services
Value Line and Morningstar are two Blank______ that provide detailed information on mutual funds.
prospectus
What document discloses corporate earnings, assets, liabilities, products, or services and the qualifications of top management?
interest rate risk
What risk is the result of changes in the interest rates of the economy?
stocks, bonds, fixed-income securities, and money market instruments
What types of securities do asset allocation funds invest in?
be actively involved with your investment.
When dealing with an account executive, it is a good idea to:
the choice is not easy because professional managers can make mistakes.
When deciding to buy a mutual fund:
Blank 1: reevaluate, evaluate, review, monitor, or reassess
When doing research on your investments, it is important to save the information in order to your investment later on.
Blank 1: income
When establishing the minimum recordkeeping requirements you want to keep track of dividends, interest paid, and other sources of .
What is important to you and what do you value?
When looking at investment, what is the first question you should ask yourself?
Blank 1: 5 or 7 Blank 2: 25 or 35
When purchasing a stock, the brokerage firm will usually charge a minimum commission between $ and $.
Blank 1: internet, information, web, or source
When searching for information on investments, selective use of the is essential.
Blank 1: prospectus
When selling new securities, corporations must release all information regarding the investment in a document known as a(n) .
Blank 1: increase or rise
When the Standard & Poor's 500 Index increases, index mutual funds that invest in these stocks .
preferred and common
Which are the two basic types of stocks?
preferred Reason: Correct. Preferred stock is a type of stock that gives the owner the advantage of receiving cash dividends before common stockholders are paid any dividends.
Which category of stockholder receives dividends first?
investor relations department
Which department in a corporation provides information regarding investing in that company? This information can usually also be found on the corporation's website.
internet
Which is used to provide up-to-date price, research, and lower commission for bonds?
decreased risk of default safe investment backed by the government
Which of the following are advantages of purchasing U.S. treasuries?
Kiplinger's Personal Finance BusinessWeek Money
Which of the following are business periodicals that provide information and advice designed to improve investment skills?
account executives investor relations departments investment brokers libraries
Which of the following are good sources of investment information?
investment brokers account executives libraries investor relations departments
Which of the following are good sources of investment information?
They find it difficult to sell stock. They use interest as a tax break. They need money to finance ongoing activities.
Which of the following are reasons why corporations sell bonds?
foreign stocks small, medium, and large corporation stocks bonds
Which of the following are some of the typical asset classes utilized in asset allocation?
an investment company that pools investors' money to invest in various securities
Which of the following best defines a mutual fund?
The sales force will explain the fund and offer advice on when to buy and sell.
Which of the following is a "stated" advantage of load mutual funds?
Mutual funds
Which type of investment ranges from very conservative to very speculative?
the federal government
Who requires the release of the prospectus for corporations selling new securities?
Blank 1: sold or called
Yield to maturity may differ from the investor's actual rate if the bond is before the maturity date.
by requesting one by mail. by calling a toll free number. by accessing the company's website.
You can get a mutual fund prospectus:
$12,005 Reason: Correct. $12,000 + 5 = $12,005
You purchased Krispy Kreme stock valued at $12,000. Your full-service investment company charges $5 for commission. What is the total cost of the stock purchase?
Blank 1: 1 or one
The 12b-1 fee of a mutual fund cannot exceed % of the fund's assets per year.
sinking fund
A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is a Blank
sinking fund
A fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue is a Blank______.
Blank 1: deposits or payments
A sinking fund is a fund to which annual or semiannual are made for the purpose of redeeming a bond issue.
Blank 1: split
A stock is an event in which the shares of stock owned by existing stockholders are divided into a larger number of shares.
mid cap
A stock issued by a corporation that has capitalization of between $2 and $10 billion is known as what kind of stock?
Blank 1: Aaa Blank 2: C
For Moody's rating system, the highest rating is , while the lowest is .
AAA to D
For Standard & Poor's, the bond ratings generally range from Blank_____
maturity date
For a corporate bond, the date on which the corporation is to repay the borrowed money is called Blank______.
noncompetitive bids.
For treasury securities, most investors are willing to accept the interest rate determined at auction so they are using:
Blank 1: aggressive or rapid
Funds categorized as growth funds seek rapid growth by purchasing stocks whose price is expected to increase dramatically in a short period of time.
Blank 1: more
General obligation and revenue bonds are risky than U.S. treasuries
Lipper Morningstar Value Line
Which of the following are subscription services that provide detailed mutual fund information?
money market instruments stocks bonds
Asset allocation funds typically invest in Blank______.
stocks bonds money market instruments
Asset allocation funds typically invest in Blank______.
closed-end open-end exchange-traded
Which of the following are typical types of mutual funds?
Blank 1: commissions
A 12b-1 fee defrays the costs of distribution and marketing a mutual fund and paid to brokers who sell shares in the mutual fund.
index fund
A fund designed to mimic the return of the S&P 500 is a(n) Blank_
index fund
A fund designed to mimic the return of the S&P 500 is a(n) Blank___
Blank 1: load
A fund is a mutual fund that charges as much as 8 1/2% every time an investor purchases shares.
Blank 1: bond
A bond indenture is a legal document that details all of the conditions relating to a issue.
Blank 1: proxy
A is a legal form that requests that stockholders transfer their voting rights to someone within the organization who know the situations of the company better.
bond indenture.
A legal document that details all of the conditions relating to a bond issue is called a:
Blank 1: independent
A trustee is a financially _ firm that acts as a bondholder's representative.
advice and information from your discount broker.
A typical bond transaction would not include:
yield to maturity
A yield calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current price, and the dollar amount of interest is called Blank_____
annualized holding period.
A yield calculation that takes into account the total return, the original investment, and the time the investment is held is called the:
Blank 1: closed
A(n) -end fund issues shares only when it is organized and its shares are usually traded on a stock exchange.
D
According to Standard & Poor's, bond issues in default would have which rating?
monitor their activity
After making your investments, it is crucial to Blank_____
prospectus
All details regarding fund fees and expenses must be contained in the investment company's Blank__
dividends
Although policies vary, Blank______ are typically paid on a quarterly basis if they are paid.
day trader
An individual who buys and sells stock and other securities in a very short period of time is called a Blank______.
fundamental analysis.
An investment practice based on the assumption that a stock's intrinsic or real value is determined by the company's future earnings is called:
Blank 1: stock or security
Buying on margin is a technique whereby an investor borrows part of the money needed to buy a particular .
$16.47 Reason: Correct. ($500 million − $6 million)/30 million shares
If a mutual fund's portfolio is valued at $500 million while there are liabilities of $6 million, what would be the NAV if there were 30 million shares outstanding?
good information and know how to use it.
Beginning investors must find:
Standard & Poor's 500 Index.
Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the:
For a bond, the maturity date is the date on which the corporation is to repay the borrowed .
Blank 1: money, funds, amount, sum, principal, or fund
Blank 1: market or dollar
The net asset value is calculated by dividing the current value of the fund's portfolio (reduced by liabilities) by the number of outstanding shares.
$9,425 Reason: Correct. The commission will be be $575, leaving $9,425 to invest.
If you are investing $10,000 in a mutual fund that charges a 5.75% sales load, how much of your investment will be available to purchase shares?
dividend payout
The percentage of a firm's earnings paid to stockholders in cash is called Blank______.
conservative stock.
Candace Jones has a stock with a beta of 2, while Bill Smith's stock has a beta of 0.6. Smith most likely has a(n): Multiple choice question.
Blank 1: index
Cheaper to manage, funds have lower management fees and expense ratios than other types of funds.
Blank 1: withdrawn
Class B shares have a commission charge when the money is during over the first five years.
Blank 1: dividends
Companies choose to pay to keep stockholders happy and prosperous.
Blank 1: stock or shares Blank 2: property
Corporate dividends for common stock may take the form of cash, additional , or company .
Blank 1: bonds or bond
Corporations may sell in an attempt to raise money for ongoing activities.
6.59%
Current market value = $987. Annual interest amount = $65. Solve for current yield.
Blank 1: market Blank 2: price or value
Current yield is determined by dividing the annual dollar amount of interest generated by an investment by the investment's current .
Blank 1: value or price
Current yield on a corporate bond = annual interest amount/current market .
Blank 1: earnings or income Blank 2: share or shares
Price-earnings ratio is equal to the price of a share of stock divided by the corporation's per of stock.
Blank 1: advisory, advice, or advisement
Professional financial services offer online research reports about mutual funds.
exchange-traded funds invest in the stocks of an index, so very little management is needed.
Professional management is less of a concern with exchange-traded funds because:
Blank 1: index
Exchange-traded funds invest in the stocks or securities contained in a specific stock or securities .
Blank 1: maturity
Face value is the dollar amount the bondholder will receive at the bond's date.
name of manager
Which of the following is NOT typically found in newspaper coverage of mutual funds?
current yield Reason: Correct. The current yield is determined by dividing the annual income amount generated by an investment by the investment's current market value.
Determined by dividing the annual dollar amount of interest generated by an investment's current market value is called Blank______.
Blank 1: small, little, new, beginning, initial, or beginner
Diversification and professional management are two reasons why financial experts recommend bond funds for investors.
price per share
Dividend yield = annual income amount divided by Blank______.
Blank 1: after-tax, net, or post-tax Blank 2: shares
Earnings per share is equal to income divided by the number of outstanding of a firm's common stock.
Blank 1: random or unpredictable
Efficient market hypothesis is a theory based on the assumption that stock price movements are purely .
Blank 1: owners, shareholders, investors, or stockholders
Equity capital is money that a business obtains from its .
Blank 1: dividends
Equity income funds invest in stocks with a long history of paying .
5.75% Reason: Correct. (10,000 − 9,425)/10,000 = 0.0575
If you are investing $10,000 in a mutual fund that charges a sales load, and when you look at your statement you see your beginning balance is $9,425. How much was the sales load (as a percent of invested funds)?
2× the number of shares previously owned.
In the case of a 2-for-1 stock split, the stockholder now owns:
net profits
Interest charges incurred when buying stock on margin will reduce Blank______.
Blank 1: higher, bigger, larger, greater, high, or more
Interest for treasury notes is slightly than T-bills since investors must wait longer to get their money back.
Blank 1: 3 or three Blank 2: 10 or ten
Intermediate bond funds usually invest bonds maturing in to years.
Full service matches Choice Beginning investors will little experience. Discount matches Choice People who understand "how to" and want to make their own decisions. Online matches Choice Understand "how to" and are comfortable trading on the Web.
Match typical clients with the type of brokerage firm recommended.
stocks matches Choice 5 to 10 years certificates of deposit matches Choice 2 years or less
Match your time horizon with the applicable investment option.
10 years. Reason: Correct. The maturity for treasury notes ranges from 2 to 10 years.
Maturity for treasury notes ranges from 2 years to:
to keep investors happy.
Most companies like to pay dividend
to keep investors happy.
Most companies like to pay dividends:
Blank 1: quarterly
Most dividends are paid on a basis.
Blank 1: listed Blank 2: accepted or approved
Securities sold at a particular exchange must be first , or for trading.
selling short. Reason: Correct. Selling short is selling a stock you don't own in hopes that the price will decrease.
Selling a stock that has been borrowed from a brokerage firm and must be replaced at a later date is called:
Blank 1: international or global
Since they invest in foreign stocks, mutual funds purchase securities in markets throughout the world.
Blank 1: small
Small cap stocks are those issued by companies.
6.0%
Solve for yield to maturity. Annual interest = $50.00, face value = $1,000, market value= 916, number of periods = 12.
additional risk
Stocks that offer larger returns also include Blank______.
Blank 1: tax
Taxable equivalent yield is equal to tax-exempt yield divided by 1.0 minus your rate. This is a one-word answer.
1.0 Reason: Correct. Taxable equivalent yield is equal to tax-exempt yield divided by (1 − your tax rate).
Taxable equivalent yield is equal to tax-exempt yield divided by X minus your tax rate. X is equal to Blank______.
interest rental income dividends
Taxes can affect which of the following areas of investing?
rental income dividends interest
Taxes can affect which of the following areas of investing?
federal agency publications with information on bonds. Reason: Correct. The U.S. treasury is a federal agency that provides information about bond investing.
The U.S. treasury is an example of a:
increased diversification.
The advantage of investing in a fund of mutual funds is:
shares can be bought and sold anytime during the day rather than at the close of business. no minimum investment amount. lower transaction fees.
The advantages of investing in an exchange-traded fund (ETF) include:
dividend yield
The annual dollar amount of income generated by an investment divided by the investment's current market value is called Blank______.
1
The beta for the S&P 500 is Blank____
dividends
The buy-and-hold technique includes the reinvestment of Blank
dividends
The buy-and-hold technique includes the reinvestment of Blank_
yield
The rate of return earned by an investor who holds a bond for a stated period of time is called Blank______.
market order
The request to buy or sell a stock at the current market value is called a Blank______.
option
The right to buy or sell a stock at a predetermined price during a specified period of time is called Blank______.
Blank 1: grow, increase, gain, mature, rise, accrue, or accumulate
The sooner you invest, the longer your investment will have to .
buying long Reason: Correct. Buying long is buying the stock in hopes that the price will increase.
The strategy of buying a stock hoping it will increase in value over time is called Blank_____
Blank 1: closed Blank 2: exchange
The three general types of mutual funds are -end, -traded, and open-end funds.
False Reason: Correct. Buying long means you buy a stock, plan to hold it for awhile, and hope it increases in value from price appreciation and also possibly from dividend income.
True or false: Buying long is the idea that when you buy a stock, it will decrease in value.
True Reason: Correct. Investing $100 per month in IBM stock would be an example of dollar cost averaging.
True or false: Dollar cost averaging is a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals.
True Reason: Correct. The three main reasons investors purchase corporate bonds are interest income, possible increase in value, and repayment at maturity.
True or false: Investors purchase corporate bonds for interest income, increase in value, and repayment at maturity.
False Reason: Correct. Net profits will be decreased by interest paid on margined stocks.
True or false: Net profits will be increased by interest on margined stocks.
False Reason: Correct. Research and evaluation techniques can reduce risks associated with stock investments.
True or false: Research and evaluation increase the risk associated with stock investments.
False Reason: Correct. Subordinated debentures are more risky than mortgage bonds.
True or false: Subordinated debentures are less risky than mortgage bonds.
True Reason: Correct. Discount brokers or brokers online usually charge less, but offer little if any advice on trades.
True or false: The advantage for an investor to trade bonds through an online broker is discounted commissions on trades.
True Reason: Correct. Annualized holding period yield takes into account total return, original investment, and the time the investment is held.
True or false: The annualized holding period is a yield calculation that takes into account the total return, the original investment, and the time the investment is held.
book value
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?
internet
What resource is essential for up-to-date investment information and investment research?
Blank 1: fifty or 50
When buying stock on margin, the current margin requirement is %.
knowing where to find relevant information knowing how to use relevant information
Which of the following must new investors master to become more proficient investors?
beta earnings per share price-earnings ratio
Which of the following provide historical measures?
They have no salespeople.
Why are no-load funds free of commissions?
Blank 1: open
With a(n) -end fund, the shares are issued and redeemed by the investment company at the request of the investors rather than purchased and sold on securities exchanges.
Blank 1: exchange
With the passive nature of managing an -traded fund, the fees associated with owning shares are usually less when compared to other funds.
Blank 1: return or interest Blank 2: bond
Yield is the percentage rate of earned by an investor who holds a for a stated period of time.
Blank 1: price or value Blank 2: interest
Yield to maturity is a calculation that takes into account the relationship among a bond's maturity value, the time to maturity, the current , and the dollar amount of .
Blank 1: Treasury Blank 2: 52 or 52-
bills, known as T-bills, are sold with 4-week, 13-week, 26-week, and -week maturities.
Unlike stocks and mutual funds, which investment type is known for safety?
bonds
A corporation's written pledge to repay a specified amount of money with interest is called a Blank______.
corporate bond
Blank 1: Safety or Safe Blank 2: risk or risks
in an investment means minimal risk of loss, while in an investment means a measure of uncertainty about an outcome.
Blank 1: Location
is the most important factor for real estate investments.
Blank 1: price, value, or amount
limit order is a request to buy or sell a stock at a specified .
Your most challenging concepts Recall that interest on margin will reduce the net profits. Define primary market. Define the market-to-book ratio.
mhmm
Your most challenging concepts Recall the two methods of measuring returns for a bond. Recall why the yield to maturity may differ from the investor's actual rate of return. Define a municipal bond.
mhmm
Your most challenging concepts Recognize that much of the investment information can be obtained via other sources (investment brokers, libraries). Recall that taxes can affect many areas of investing, including dividends, interest, rental income, and capital gains and losses. Recall reasons for keeping records of research.
mhmm
Blank 1: Global
stock funds invest in stocks of companies throughout the world, including the United States.
Blank 1: Exchange
traded funds invest in the stocks or securities contained in a specific stock or securities index.
Blank 1: credit Blank 2: after, net, or post
A good rule of thumb is to limit consumer payments to 20% of -tax income.
speculative investment
A high-risk investment made in the hope of earning a relatively large profit in a short time is called a
speculative investment
A high-risk investment made in the hope of earning a relatively large profit in a short time is called a Blank______.
professional management.
A person with little to no investing experience may choose mutual funds because they offer:
inflation
A rise in the general level of prices is called Blank_
