Economics unit 3
The stock price of Greengold Corp. is $18 per share, and the formula for market capitalization is as follows:Market capitalization = Stock price per share × Total number of shares in marketplace. If Greengold's total number of shares in the stock market is 10 million, what is their market capitalization? (3.3.2)
180
Suppose that a borrower has a short-term cash flow problem. Which personal loan is the most productive financial decision for the borrower in this situation?
A personal line of credit
Deanna plans to calculate her emergency fund ratio using the following formula:Emergency Fund Ratio = Monetary Assets / Monthly Living Expenses What must Deanna do to ensure her calculation is accurate?
Add all her expenses and then subtract nonessential expenses
Which of the following statements is true of mutual fund distributions?
An investor must consider the mutual fund distribution when they prepare their taxes.
Nigel is self-employed. He seeks funding to expand his business operations. What must Nigel do in order to sell shares in the business to raise funds? (3.3.1)
Convert the business into a corporation
A family-owned specialty food corporation wants to expand and seeks funding for the expansion. Which of the following is necessary for the company to do in order to sell shares through an initial public offering (IPO)? (3.3.1)
Convert the company from a private enterprise into a public firm
David and Linda are planning to invest in Alpha Inc. stock. David is ready to invest if he earns a 4% return on his investment. However, Linda is ready to invest if she earns a 7.5% return on her investment. Which of the following statements is true about the risk-taking capacities of David and Linda?
David is ready to take more risks and pay a higher market price for the Alpha Inc. stock as compared to Linda.
Eli is a college graduate who is just starting his career in marketing. He receives a lump-sum amount of money from his parents as a gift. Eli has high to moderate risk tolerance and plans to invest the money for at least the next 10 years. Which of the following investment options will best suit Eli? (3.3.5)
Eli should invest the money to buy stocks from a medium-sized or a small-sized company.
Wesley is deciding between investing in stocks or bonds. Which of the following reasons would indicate that Wesley should invest more in stocks than in bonds?
He has a high risk tolerance and wants to earn as much as he can.
Ben uses his financial skills to analyze investment options suited to his financial risk threshold and goals. After research, he picks treasury securities and certificates of deposit to invest his money. Which of the following statements probably describes Ben best?
He has a low threshold for risk.
Ramon wants to invest in real estate, but he cannot afford to buy a house on his own. He decides to use a real estate investment trust (REIT) instead. Which of the following is true for Ramon's situation?
He will receive dividends from the REIT.
Helga buys bonds in a company as an investment. Which of the following will be true in this scenario? (3.3.3)
Helga will earn money through interest payments the company makes to her.
Which of the following statements is true of a limit order that is used by investors while purchasing or selling stocks?
If a limit order is placed, the brokerage firm buys stocks at or below a certain price as per the investor's direction.
Kara is building her investment portfolio and is advised she must diversify in order to lower the risk. Which of the following must Kara do to diversify her investments?
Include assets that have different expected returns and different risk characteristics
Which of the following is an advantage of investing in an REIT?
Investors can diversify their portfolio into real estate at a lower cost.
Which of the following is a feature of a margin account opened with a brokerage firm? (3.3.6)
Investors can purchase stocks with borrowed money.
Which of the following statements is true of an actively managed mutual fund? (3.3.4)
It aims to reach a higher rate of return than the stock market, assuming the same level of risk.
Which of the following is true of a federal grant?
It is a cash award paid by the government to the school on behalf of the student.
Why is investing in mutual funds a productive financial decision for its investors?
It provides individuals with limited funding the opportunity to invest in different types of investments.
Janelle's financial advisor advises her to buy an apartment as a dual-purpose asset as this will be beneficial for her. What does this statement mean? (3.3.7)
Janelle should buy the apartment to live in and also as an investment.
The owner of a craft supplies business has two stores and wants to open more stores in another city. The owner of the store approaches an underwriter for the funds required to open new stores. Which of the following will the underwriter do? (3.3.1)
Prepare the business to raise money from investors
Which of the following is mentioned in a brokerage statement?
Summary of investments held in an account
David requires $750 to pay his home repair bill. He uses his problem-solving skills and opts to borrow the amount from a bank rather than a check casher. Identify the most likely reason for David's choice
The bank charges a lower interest rate on its loans when compared to the interest charged by check cashers.
The market price of Magnet Media stock is $10 per share, and the formula for P/E ratio is as follows:P/E ratio = Stock price per share / Earnings per share. If the company's earnings per share is $2.50, what is their P/E ratio? (3.3.2)
4
Dana is a young lawyer who has a moderate level of financial risk tolerance, but she wants to maximize the returns she receives. Which of the following investment options will best suit Dana?
Dana should invest her money in corporate bonds.
Which of the following statements is true of a market order to sell securities? (3.3.6)
Due to continuous changes in the market prices, no assurance can be given about the sale price of stock.
Jayden is a school teacher nearing retirement. He has a moderate risk tolerance and plans to invest his retirement money in order to obtain profitable returns. He plans to use the money for his retirement and medical expenses. Which of the following investment options will best suit Jayden? (3.3.5)
Jayden should invest his savings in treasury bonds because they ensure a decent rate of interest with minimal risk.
Luca is in the 12% marginal tax bracket and makes a nonqualified withdrawal from a Roth IRA. Which of the following is true of the amount owed on the withdrawal by Luca?
Luca owes 12% income tax and a penalty on the interest portion of the amount withdrawn from the Roth IRA.
Lucy analyzes her risk tolerance and realizes that she is very risk averse. Considering her low risk tolerance, which type of investment should Lucy invest in?
Lucy should invest in a savings account.
The Murrays could not keep up with the monthly payments for their home and the bank has foreclosed on their house.
The bank can sell the house and the Murrays may have to pay the difference between what they owe and the selling price of the house.
