Personal Finance Ch.13-Ch.16 Exam 3
A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.
1) True
Mortgage bonds are somewhat risky so they pay higher return to investors.
1) True
Work to balance your budget is considered to be good advice for a potential investor starting an investment program.
1) True
A load fund is a mutual fund in which investors pay a commission when they purchase and when they sell their shares.
False
A mutual fund that invests in the common stocks of companies in many different industries is called a sector fund.
False
A specuative investment is an investment that is made in the hope of earning a relatively large profit over a long period of time.
False
A subordinated debenture is a more secure investment than a mortgage bond.
False
An exchange-traded fund, commonly referred to as an ETF, is a fund that invests in the real estate market.
False
Bond interest payments are not a tax-deductible business expense.
False
Borrowing money specifically for investment purposes is good advice to acquire money for starting an investment program.
False
Buying stock on margin is a safe, conservative investment strategy.
False
If a corporation's earnings decline, the stock's value Usually increases.
False
If overall interest rates in the economy fall, then a corporate bond with a fixed interest rate will decrease in value.
False
Once you have made a decision to buy an investment, there is no need for continued evaluation.
False
Over the past 50 years, stocks and U.S. government bonds have returned about the same rate of return.
False
Question Although mutual funds are popularGmong individual investors, most people do not use them as part of an IRA or retirement account.
False
The only way an investor can make money on a bond investment is to hold the bond until maturity.
False
The rate of return on an investment has no effect on a long-term investment program.
False
capital-gain distributions are taxable at the end of the tax year. If an investor uses a reinvestment plan to invest their income dividends and capital-gain distributions, neither the income dividends nor
False
A bond backed by the full faith, credit, and unlimited taxing power of the municipality that issued it is called a general obligation bond,
True
A bond that is backed only by the reputation of the issuing corporation is called a debenture bond.
True
A closed-end fund is a fund in which shares are issued only when the fund is first organized.
True
A contingent deferred sales load is a 1 to 5 percent charge that shareholders pay when they withdraw their investment from a mutual fund.
True
A corporate bond is a corporation's written pledge that it will repay a specified amount of money with interest.
True
A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.
True
A mutual fund prospectus describes the fund's risk factors, past performance, the type on investments in the fund, and the fund managers' investment philosophy.
True
A no-load fund is a mutual fund in which no sales charge is paid by the individual investor to buy or sell shares.
True
A proxy is legal form that lists the issues to be decided at the annual stockholders' meeting and asks a stockholeler to sign something that allows someone else to vote for them.
True
A registered bond is a bond whose ownership is registered in the owner's name by the issuing company.
True
A revenue bond is a bond that is repaid from the income generated by the project it is designed to finance.
True
A sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue.
True
A stock that pays higher than average dividends is called an income stock.
True
Accurate recordkeeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.
True
All information related to management fees, contingent deferred sales fees. 12b-1 fees, and other expenses are contained in a mutual fund's fee table.
True
Asset allocation funds invest in various asset classes including stocks, bonds, fixed-income securities, and money market instruments,.
True
Asset allocation is the process of spreading your assets among several different types of investments to lessen risk.
True
Because of the age factor, most young investors tend to invest a large percentage of their nest egg in growth-oriented investments.
True
Dollar cost averaging is a long-term technique used by investors to purchase an equal dollar amount of the same stock at equal intervals in time.
True
Dollar cost averaging is a long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time.
True
Generally, interest on corporate bonds is paid every six months.
True
If you are young, recently graduated from college, and want to establish a long-term investment program, growth stocks would be a good recommendation for your investment program.
True
Inflation risk occurs when an investment does not keep up with prices that are increasing in the overall economy.
True
Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value.
True
Mutual fund investors receive a return on their investment through income dividends and capital gains distributions.
True
Technical analysis is based on the forces of supply and demand.
True
The Net Asset Value (NAV) is the fund's market value minus expenses and then divided by the number of shares.
True
The decision to establish an investment plan is an important first step to accomplishing your financial goals.
True
The legal conditions for a corporate bond are described in the bond indenture.
True
The major reasons why investors purchase mutual funds are professional management and diversification
True
The potential return of any investment should be directly related to the risk that the investor assumes.
True
Unlike stocks and bonds, mutual fund managers encourage dollar cost averaging by selling fractional shares.
True
