Chapter 10, 11, and 12
John bought stock for $350. A year later, he sold it for $385. What is his return on investment?
10%
Which of the following retirement plans is a tax-deferred plan in which employers sometimes match a portion of employee contributions?
401(k) plan
Which of the following retirement plans is a tax-deferred plan for employees of nonprofit organizations?
403(b) plan
When a company makes an initial public offering (IP0),
All of these
A contract purchased from an insurance company that guarantees a series of regular monthly payments for a set time
Annuity
A period in the stock market when stock prices are steadily decreasing
Bear Market
A debt instrument issued by a corporation or government
Bond
Examples of using leverage to complete a stock trade include
Both Selling Short & Buying on Margin
A period in the stock market when stock prices are steadily increasing
Bull Market
The process of borrowing money from a broker to buy stock is known as
Buying on margin
Unexpected emergencies or other unplanned events are known as
Contingencies
Which of the following types of bonds can be exchanged for shares of common stock?
Convertible Bond
Buying stocks and other investments directly from companies and holding them Selected:
Direct Investing
A bond that is sold for less than its face
Discount Bond
An order to buy (or sell) a stock that allows the broker to get the best possible price
Discretionary Order
Holding a variety of investments to reduce risk is known as
Diversification
Which of the following investment strategies involves investing on a regular basis regardless of market conditions?
Dollar-cost Averaging
A limit order is a request to buy or sell stock at the current market price
False
A premium bond is one that sells for less than its face value.
False
A stockbroker is a person who buys and sells securities on behalf of others but is not allowed to provide advice on which products to buy.
False
An initial public offering (IP0) is an example of a secondary market transaction in which you buy stock from company stockholders.
False
Common stock is considered a less risky investment than preferred stock or bonds.
False
Economic decline is not a good time to buy stocks because stock prices will be high.
False
It is more expensive to buy stock in round lots than it is to buy them in odd lots.
False
Municipal bonds are issued by state governments and the federal government
False
Reinvesting allows stockholders to buy new shares of stock at a reduced price from a stockbroker
False
Today, more employers are offering employer-sponsored retirement plans
False
The central bank of the United States, which is responsible for setting monetary policy and regulating the banking system, is the
Federal Reserve System
Which of the following organizations is a private, nonprofit organization that regulates firms selling securities in the United States?
Financial Industry Regulator Authority
A contract giving the right to sell a company's products and services
Franchise
The ideal investment
Has a high rate of return with low risk
Growth stocks and real estate are often considered to be
High Risk
Which of the following investment options typically has the highest risk?
Individual Stocks
Which of the following types of investments is a form of direct investing?
Individual Stocks
Which of the following types of investment risk could occur if prices in general rise faster than the return on an investment?
Inflation Risk
A collection of assets that provides diversification for an investor
Investment Portfolio
A measure of how quickly an asset can be turned into cash
Liquidity
Which of the following transactions is a request to buy or sell stock at the current price?
Market Order
Which of the following investment strategies requires a good understanding of the economy and financial market conditions as the basis for investment choices?
Market Timing
Which of the following investments is a medium-risk choice?
Mutual Funds
Which of the following types of investments is a form of indirect investment?
Mutual Funds
Fewer than 100 shares of stock
Odd lot
Which of the following types of investment risk could occur as a result of a new law, policy, war, or other current event?
Political Risk
A bond that is sold for more than its face value
Premium Bond
The financial market in which new issues of securities are sold is the
Primary market
When investors forego a cash dividend to receive more shares of stock in a company, this is a form of
Reinvesting
An individual retirement account in which contributions are taxed, but earnings are not
Roth IRA
Exactly 100 shares or multiples of 100 shares of stock
Round Lot
Ownership interest in a publicly held company
Stock
Which of the following types of investment risk could occur as a result of a company's poor management or product recalls?
Stock Risk
The issuance of more stock to current shareholders in proportion to the stock they already owned
Stock Split
A strategy of making regular and systematic changes in stock ownership based on trends in the economy
Stock Turning
Which of the following transactions is a request to sell stock when it reaches a certain price?
Stop Order
A long-term, planned approach to making investments is called
Systematic Investing
A strategy that involves regularly setting aside cash that can be used to achieve goals is called
Systematic Saving
A traditional IRA is
Tax deferred
When investing, the higher the risk you are willing to take
The greater your possible return may be
All of the following are true about government bonds except
They make only low-risk investments
All of the following are true about investment clubs except
They make only low-risk investments
A retirement account becomes portable when it is vested and can be rolled over to another account
True
A typical CD is not a liquid investment because you must pay a penalty if you withdraw the money before the stated time.
True
Money in a traditional IRA may not be withdrawn before age 59 1/2 without paying a penalty.
True
Political events in this country and abroad often affect financial markets.
True
Selling short involves selling stock that has been borrowed from the broker and replacing it later.
True
The SEC is the primary overseer and regulator of U.S. securities markets.
True
Which of the following government agencies is responsible for the economic security of the United States?
U.S. Department of the Treasury
