Personal Finance 2

A mutual fund that invests in companies expecting higher-than-average revenue and earnings growth is called a(n) _____________blank fund.

Growth

When compared to corporate bonds, the dividend yield on preferred stocks is often __________ the yield on bonds

Higher than

If overall interest rates in the economy fall, a corporate bond with a fixed interest rate will generally:

Increase in value

REITs, Ginnie Maes, and Freddie Macs are examples of _____________blank real estate investments.

Indirect

In what type of real estate investment does the investor not hold legal title to the property?

Indirect investment

Darius Baker has joined a real estate syndicate that bought an office building in downtown Orlando, Florida. What type of investment does he hold?

Indirect investment in real estate

An example of _____________blank risk occurs when the financial return on an investment does not keep up with prices that are increasing in the overall economy.

Inflation

Real property equity investments are a possible hedge against:

Inflation

A mutual fund that invests in investment-grade corporate debt with maturities between 3 and 10 years is called a(n) _____________blank fund.

Intermediate corporate bond

A mutual fund that only invests in companies outside the United States is called a(n) _____________blank fund.

International

Which one of the following statements is false?

Investors who purchase mutual funds are guaranteed a higher rate of return than if they were to purchase comparable stocks and bonds directly.

The ability of an investment to be converted to cash without a substantial loss in dollar value is called:

Liquidity

A mutual fund in which investors pay a commission every time they purchase shares is called a(n) _____________blank fund

Load

Which one of the following statements is true regarding bond characteristics?

Long-term corporate bonds have maturities over 10 years.

Which one of the following funds would be considered the safest investment?

Money market fund

Ophelia Peterson has been thinking about investing in corporate bonds. She is concerned about safety and wants the most secure bond investment possible. She would most likely invest in __________ blankbonds.

Mortgage

An example of an indirect real estate investment is a(n):

Mortgage pool

Which one of these investments pools the money from many investors, hires a professional money manager to manage those funds, and offers diversification to investors?

Mutual fund

Regardless of a stock's classification, a stock is a(n) __________blank investment because there are no guarantees.

Speculative

Aubrey Strong owns stock in the Chicago Widget Company. She was just advised that in the near future she will be receiving two shares for every one share she owns today. What has the company declared that will cause this change to her shares?

Stock split

If interest rates in the overall economy decrease, what will happen to the market value of a corporate bond with a fixed interest rate?

The value of the bond will increase.

Which of the following is a true statement regarding investment goals?

To be useful, investment goals must be written.

A government security issued in minimum units of $100 with maturities that are one year or less is called a:

Treasury bill

A government security issued in minimum units of $100 with a 30-year maturity is called a:

Treasury bond

An investor concerned with a predictable source of income provided by an investment would choose:

US governemtn securities

Which one of the following investments would rank the highest with regard to safety?

US government bond

The median price of existing homes:

has increased over the past 30 years, thereby acting as a hedge against inflation.

An emergency fund should be deposited in a:

savings account or other near-cash investments.

An example of a direct real estate investment is a:

single-family dwelling.

Jasmine Hill purchased 100 shares of Goshen Systems stock for $32.50 per share. Her commission for this purchase was $25. She sold the stock two years later for $45 per share and a commission of $40. What was Jasmine's total dollar return on this stock?

$1,185

A $1,000 corporate bond pays 5 percent a year. What is the annual interest you will receive?

$50

Joaquin Garcia earns $40,000 a year. His monthly expenses total $2,500. What is the minimum amount of money that he should set aside in an emergency fund?

$7,500

An intermediate-term investment goal is defined as one that will be accomplished within a period of:

1-5 yrs

When an investor purchases shares in a load fund, the average load charge is between _____________blank percent.

2-5

A good rule of thumb is to limit consumer credit payments to no more than _____________blank percent of your net (after-tax) income.

20

If the board of directors approves a two-for-one stock split, an investor who owns 125 shares before the split will own __________blank shares after the split.

250

Which of the following is the process of spreading your money among several different types of investments to lessen risk?

Asset Allocation

A mutual fund that invests in stocks and bonds with the primary objectives of conserving principal, providing income, and long-term growth is called a(n) _____________blank fund.

Balanced

A safe investment that generally attracts conservative investors is called a __________ stock.

Blue-chip

Which one of the following statements is correct regarding bond and stock differences?

Bonds are a form of debt financing.

Which one of the following investments offers the greatest liquidity?

Checking acct

A mutual fund in which shares are issued only when the fund is organized is called a(n) _____________blank fund.

Closed-end

Which one of the following investments offers the greatest opportunity for growth?

Common Stock

Matthew Goldblum has just purchased a security which has no maturity date and no promised dividend payments. He can recoup his investment by either selling the security to another individual. What type of security did Matthew purchase?

Common stock

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed?

Corportate earnings, assets and liabilities, products or services, qualifiactions of top management

Kareem Clancy wants to diversify his portfolio by adding a stock that has a value which moves in direct relation to the business cycle. What type of stock is Kareem thinking about adding to his portfolio?

Cyclical stock

For most mutual funds, the net asset value is calculated at the close of trading each:

Day

If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally:

Decrease in value

Tareq Feraoun wants to diversify his portfolio by adding a stock that maintains stable earnings when the economy declines. What type of stock does Tareq want to add to his portfolio?

Defensive stock

Mariana Pacheo owns a condominium at the beach which she rents out to vacationers. What type of investment does she hold?

Direct investment in realestate

Real estate investments are classified as:

Direct or indirect

About 90 percent of REITs are _____________blank REITs.

Equity

Which type of REIT owns and operates income-producing real estate?

Equity

A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a(n) _____________blank fund.

Equity income

A mutual fund in which no sales charge is paid by the individual investor is called a(n) _____________blank fund.

No-load

A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a(n) _____________blank fund

Open-end

Quentin Hayes has a mutual fund that automatically takes $50 out of his paycheck each month. Which suggestion for obtaining the money he needs for investing is he following?

Participating in an elective savings program

Arianna Burnett owns stock in the Westlake Gems Company. She knows in advance that the dividend on this stock is $1.50 per share. Given this, you know for sure that she purchased which type of stock?

Preffered

The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances in a(n):

Prospectus

Which one of the following investments offers the least liquidity?

Real estate

Elin Lindberg has received a $12,000 gift from her mother and is trying to decide how to invest it. She thinks she would like to invest it in stocks, because she knows that stocks have been appreciating by about 10 percent over the last several years. What aspect of investing interests Elin?

Return

If you have a vacation home, the after-tax cost of owning it over time has:

Risen

Bai Cheng has received $35,000 in a divorce settlement and is trying to decide how to invest it. She has looked at stocks but is uncertain as some stocks have lost a lot of value for their owners recently. What aspect of investing is she most concerned about?

Risk

Elliott McLeod just received $12,000 from his grandmother's estate. He has thought about buying himself a new motorcycle with the money but has decided instead to add the money to his mutual fund account. What is he doing to obtain the money for investing?

Sacrificing some purchases to provide financing for investments

After the death of her husband, Laila Fareedi, 35, received a check for $250,000 from a life insurance company. Laila has two small children and wants to make sure that both she and the children are taken care of in the future. Based on this information, which of the investment factors listed below would be the most important to Laila in her investment program?

Satefy

A mutual fund that invests in companies within the same industry is called a(n) _____________blank fund.

Sector

Which type of bond would provide a high degree of price stability, because the bonds are not very sensitive to changing interest rates?

Short-term

A provision in the bond indenture that forces the corporation to make arrangements for bond repayment before the maturity date is called a(n) __________ fund.

Sinking

A short-term investment goal is one that will be accomplished within a period of:

a year or less

Equity financing is a preferred choice to provide financing for a corporation because:

it does not have to be repaid.

Common stock dividends are paid out of profits and:

must be approved by the corporation's board of directors.

Aaron Woodward owns shares of common stock in Frey Transportation Company. The company is getting ready to pay a dividend. Aaron knows he must be registered on the corporation's books on the __________blank date in order to receive the dividend.

record

What is the primary goal of asset allocation?

risk reduction

To finance their business activities, many corporations prefer selling common stock because:

the money obtained from stockholders does not have to be repaid.