Final

Ace your homework & exams now with Quizwiz!

What type of investor might be attracted to junk bond​ funds? ​(Select the best answer​ below.)

Some investors are willing to assume a higher risk in order to generate higher overall returns.

What are some advantages of hybrid​ funds? ​(Select the best answer​ below.)

The stocks provide growth potential and the bonds provide a stable income.

What types of stocks would this type of fund typically avoid​ owning? ​(Select the best answer​ below.)

These funds often avoid investments in tobacco​ firms, gun​ makers, or producers​ and/or heavy consumers of fossil fuels.

What are some of the potential problems with this​ strategy? ​(Select the best answer​ below.)

This strategy requires frequent trading to capitalize on shifts in interest rate​ expectations, but results in high transaction costs.

A prospectus​ is: ​(Select the best answer​ below.)

a document that provides financial information about the fund.

A mutual fund​ supermarket: ​(Select the best answer​ below.)

allows investors to diversify among various mutual funds and receive a summary statement for these funds on a consolidated basis.

Junk bond​ funds: ​(Select the best answer​ below.)

also known as​ high-yield bond​ funds, focus on risky bonds issued by firms with higher default risk. These bonds offer higher yields to entice investors to buy them.

A​ bond's yield to maturity is the​ bond's: ​(Select the best answer​ below.)

annualized return if it is held to maturity.

payments on treasury bonds

are guaranteed by fed gov and are free of default

A call feature on a bond allows the bond issuer​ to: ​(Select the best answer​ below.)

buy back the bond from the investor before maturity.

An investor will benefit from owning a convertible bond​ by: ​(Select the best answer​ below.)

converting the bond into a certain number of shares of the​ issuer's stock when the​ issuer's stock price increases.

The impact on stock​ price: ​(Select the best answer​ below.)

depends on the percentage of total business conducted with that country and the magnitude and direction of the economic shift.

An effective diversification strategy is​ to: ​(Select the best answer​ below.)

diversify across stock funds and bond funds.

Investors who invest in index funds​ should: ​(Select the best answer​ below.)

earn returns that are similar to actually investing in the index

Socially responsible​ funds: ​(Select the best answer​ below.)

focus their stock holdings on firms that have high standards of corporate governance and ethical behavior.

An investor can find price quotations for​ closed-end and​ open-end funds: ​(Select the best answer​ below.)

in financial papers and at financial websites

Hybrid​ funds: ​(Select the best answer​ below.)

include both stocks and bonds in their portfolio.

​Closed-end funds​ are: ​(Select the best answer​ below.)

listed on the exchanges where they are traded.

​Diversification: ​(Select the best answer​ below.)

lowers the level of risk in a portfolio.

Exchange Traded Funds​ (ETFs) are: ​(Select the best answer​ below.)

similar to​ closed-end mutual funds expect they can be traded like stocks throughout the day. They are designed to mimic particular stock indexes or sectors and are not actively managed.

Investors are only willing to purchase bonds with a call feature if the bonds offer​ a: ​(Select the best answer​ below.)

slightly higher return than bonds without a call feat

For​ open-end funds, if a company offers several different​ funds, ​(Select the best answer​ below.)

the company name is listed in bold and the funds are listed below.

Young people should have investments in stocks as part of their portfolio​ because: ​(Select the best answer​ below.)

they have longer time horizons and should consider stocks as a primary component of their investment portfolio in order to maximize returns over time.

The abbreviated term that is used to identify the stock for trading purposes is called​ the: ​(Select the best answer​ below.)

ticker symbol

Capital gains resulting from the sale of investments held more than one year​ are

​long-term capital gains and are taxed at a lower rate than ordinary income for most investors.

Which one of the following is an example of a​ high-risk return scenario for bonds in the event that the economy​ deteriorates? ​(Select the best answer​ below.)

Firms may be unable to pay its coupon payment.

How have regulators attempted to resolve this​ issue? ​(Select the best answer​ below.)

To address this issue the SEC issued new rules in 2014 to try to make the bond rating process more transparent.

The disadvantage of investments that satisfy that priority​ is

a relatively low return

what is inflation

an increase in the general level of prices of products and services over a specific period.

Interest rates affect economic growth and thus​ have: ​(Select the best answer​ below.)

an indirect impact on stock prices

Brokerage firms expedite this process​ by: ​(Select the best answer​ below.)

creating brokerage accounts for each client.

mutual funds are managed by

portfolio managers

two terms that measure risk are

range of return and st. deviation of the returns

Real estate that can be rented generates income in the form​ of

rent payments

Income stocks​ are: ​(Select the best answer​ below.)

stocks of firms that are more mature. These firms will elect to pay much higher dividends and therefore generate more current income for their shareholders.

Another​ country's economic conditions can affect a U.S. firm​ when: ​(Select the best answer​ below.)

substantial cash flows from imports​ and/or exports are affected by the other​ country's economic​ woes, or a booming economy.

The price of a stock changes each day in response to changes in​ the

supply and demand for the stock in the secondary market

The price of land is based​ on:

supply and demand in the land market

What characteristic makes municipal bonds especially attractive to​ high-income investors? ​(Select the best answer​ below.)

tax exemption

Income from interest​ payments, coupon​ payments, and capital gains on assets held for less than a year​ are

taxed as ordinary income these are short term capital gains

When buying a stock on​ margin, an investor borrows a portion of the funds to buy the stock​ from: ​(Select the best answer​ below.)

the brokerage firm

The market for a stock is created​ by: ​(Select the best answer​ below.)

the flow of orders to buy and sell each stock

The price of a stock is determined​ by: ​(Select the best answer​ below.)

the interaction of supply and demand for that stock.

The market price of the stock depends​ on

the number of investors willing to buy a stock versus the number of investors willing to sell.

During a weak​ economy, ​(Select the best answer​ below.)

the risk of default on bonds may rise and you could only sell your holdings of these bonds to other investors if you are willing to sell them at a lower price to reflect the high risk of these bonds.

Stock exchanges​ facilitate: ​ (Select the best answer​ below.)

the trading of stocks in the secondary market by providing a physical location for trading.

What is the role of a market​ maker? ​(Select the best answer​ below.)

​Market-makers, or​ dealers, are charged with maintaining a market for certain stocks. These​ market-makers ensure that investors have liquidity and they make commissions based on the​ bid-ask spread, or the difference between what they are willing to pay for a stock and the price they are willing to sell the stock for.

what are bonds

​long-term debt securities issued by government agencies or corporations.

Corporate bonds​ are: ​(Select the best answer​ below.)

​long-term debt securities issued by large firms, subject to default risk because these are not backed by the federal government.

Municipal bonds​ are: ​(Select the best answer​ below.)

​long-term debt securities issued by state and local government agencies.

Treasury bonds​ are: ​(Select the best answer​ below.)

​long-term debt securities issued by the U.S. Treasury.

Why would investors prefer one type over the​ other? ​(Select the best answer​ below.)

An​ investor's need for current income​ and/or desire to defer taxes will determine which category of stocks they hold in their portfolio.

Interest rates are influenced by the monetary policy of​ the: ​(Select the best answer​ below.)

Fed reserve board

Some limitations of stock analysis​ include: ​(Select the best answer​ below.)

Forecasting what will happen in the future is virtually impossible and future events can have significant impacts on a​ stock's price. Many investors may look for favorable conditions that are expected to bode well for a​ firm's future earnings but this information may already be reflected in a higher stock price as other investors anticipated the same impact.

How do investors use this information to make buy or sell​ decisions? ​(Select the best answer​ below.)

Investors analyze all relevant information about a firm and its prospects and then decide how this information will impact demand and supply and therefore price.

Why would an investor buy a junk​ bond? ​(Select the best answer​ below.)

Investors buy junk bonds to earn a higher return.

What other exchange trades stocks in a similar manner to the​ NYSE? ​(Select the best answer​ below.)

NYSE MKT LLC

Which one of the following is an example of a risk for real estate​ investments? ​(Select the best answer​ below.)

Tenants may miss several monthly payments.

The primary and secondary stock markets differ in which of the following​ aspects?

The primary stock market offers newly issued securities and the secondary stock market offers existing securities.

A junk bond​ is: ​(Select the best answer​ below.)

a bond that is rated below investment grade by a bond rating agency. These bonds can be original issue junk and carry a high coupon​ rate, or they can be bonds issued earlier with higher ratings that have since been downgraded and now sell at a discount.

In a passive strategy for bond​ investment, ​(Select the best answer​ below.)

a diversified portfolio of bonds are held for a long period of time.

Municipal bonds​ have: ​(Select the best answer​ below.)

a relatively low default risk

Stock exchanges are facilities​ that: ​ (Select the best answer​ below.)

allow investors to purchase or sell existing stocks.

The​ OTC, or​ over-the-counter market,​ is: ​(Select the best answer​ below.)

an electronic communications network that allows investors to buy and sell stock.

Electronic Communication​ Networks: ​(Select the best answer​ below.)

are used to execute some transactions on the NYSE and NYSE MKT LLC.

Fundamental analysis​ involves: ​(Select the best answer​ below.)

attempting to value a stock based on fundamental characteristics such as​ earnings, revenue growth and numerous other factors.

If the U.S.​ government's fiscal policy involves raising​ taxes, corporate earnings​ will: ​(Select the best answer​ below.)

be negatively affected

Bond rating agencies have a possible conflict of interest when issuing bond ratings​ because: ​(Select the best answer​ below.)

bond rating agencies are paid by the bond issuer to rate the bond prior to issuance.

Stock prices are more sensitive in industries​ where: ​(Select the best answer​ below.)

borrowing is used by consumers

Day traders are investors​ who:

buy and sell stock the same day

If a mutual​ fund's shares decline over​ time, individual investors would have​ a

capital loss

Electronic Communication Networks​ (ECNs) are: ​(Select the best answer​ below.)

computer systems that match up desired purchases and sales of stocks.

Inflation is measured by​ the: ​(Select the best answer​ below.)

consumer price index

The two main advantages of using online brokerage services are​ the: ​(Select the best answer​ below.)

convenience and the low cost per transaction.

Stocks are financial instruments representing partial ownership in​ a

corporation

Bonds can offer a return to investors in the form​ of:

coupon payments and bond price appreciation

This approach is considered conservative because it is designed​ to: ​(Select the best answer​ below.)

cover future expenses rather than to outperform the bond market in general.

Stock prices tend to _________________ when inflation is expected to increase

decrease

Investors want to measure risk to understand​ the:

degree of uncertainty surrounding their future returns

Shareholders can earn a return through ____________ or _______________

dividends, selling their stock at a price higher than the price they paid

The main disadvantage of this strategy is that​ it: ​(Select the best answer​ below.)

does not capitalize on interest rate movements.

When performing an economic analysis of​ stocks, the three economic factors that are most closely watched​ are: ​(Select the best answer​ below.)

economic​ growth, interest​ rates, and inflation.

Your first investing priority should be​ to:

ensure adequate liguidity

floor traders

execute trades on the floor for themselves or someone else

a discount brokerage frim

executes an investors orders for a low fee but does not give investment advise

The interest income from federal agency bonds​ is: ​(Select the best answer​ below.)

exempt from state and local​ taxes, however, investors must pay federal taxes on interest income.

Investors can obtain information about firms and their corresponding industry​ from: ​(Select the best answer​ below.)

financial web sites and published sources.

The matching strategy involves selecting bonds that​ will: ​(Select the best answer​ below.)

generate payments to match future expenses.

Economic growth is measured​ using: ​(Select the best answer​ below.)

gross domestic produc

Stocks with potential for substantial growth​ are

growth stocks

Stocks are a common investment for those who believe that they will get​ a:

higher return from stocks than from other investments

An analysis of the firm​ is: ​(Select the best answer​ below.)

important because there are variations in management skills and firm performance.

stocks that deliver large dividends are

income stocks

higher economic growth

increases stock prices

IPO stands​ for: ​(Select the best answer​ below.)

initial public​ offerings, which occur when a firm sells equity for the first time in the primary market.

Two types of investors​ are:

institutional investors and individual investors.

Default​ risk: ​(Select the best answer​ below.)

is reflected in the risk premium associated with a bond

A​ firm's stock​ price: ​(Select the best answer​ below.)

is susceptible to industry conditions.

Junk bonds​ are: ​(Select the best answer​ below.)

issued by​ smaller, less stable companies and have a higher risk of default and a higher return.

Dividends are usually paid by​ older, more established firms that​ have

less potential for substantial growth

an odd is an order for

less than 100 shares of stock

If an investor expects interest rates will decline over​ time, he should invest​ in: ​(Select the best answer​ below.)

longer term maturity bonds

If investors expect interest rates to​ decline, they would invest heavily​ in: ​(Select the best answer​ below.)

longer term maturity bonds

The market value of a stock is determined​ by:

multiplying the number of shares outstanding by the market price of the stock

Coupon or dividend payments generated by a mutual​ fund's portfolio​ are

passed on to the individual investor

Corporations sell stock in order​ to

raise funds for expansion of their business operation

Top managers of a firm may be tempted to use misleading estimates of revenues and expenses​ because: ​(Select the best answer​ below.)

reported earnings influence the stock value and the firm​ value, and this is a component of​ managers' evaluation and compensation.

Bonds that have a call feature​ are: ​(Select the best answer​ below.)

risky for investors because the issuer can buy​ (call) the bonds back and issue new bonds at a lower interest rate.

To set up and use an online brokerage​ account, an investor​ would: ​(Select the best answer​ below.)

set up the account​ online, then send a​ check, and could make trades once the check clears.

An annual report​ contains: ​(Select the best answer​ below.)

standardized financial information that can be used to analyze a​ firm's performance.

If the value of the stock bought on margin​ declines: ​(Select the best answer​ below.)

the inverstor may get a margin call from the brokerage firm to put additional cash in his account to back the loan

Which of the following is a popular indicator of economic​ growth? ​(Select the best answer​ below.)

the level of employment, new home sales, personal income level

When placing an order to buy or sell​ stock, you must​ provide: ​(Select the best answer​ below.)

the name of the​ stock, whether the order is to buy or sell the​ stock, the number of shares of​ stock, and whether it is a market order or a limit order.

Technical analysis​ is: ​(Select the best answer​ below.)

the process of valuing a stock using historical price data.

Margin sales benefit the brokerage firm​ because: ​(Select the best answer​ below.)

they earn interest

Mutual funds sell shares

to individuals and invest the proceeds in a portfolio of investments such as bonds or stocks

Managers may be able to boost the reported earnings of their firm​ by: ​(Select the best answer​ below.)

using a specific accounting method

a limit order

will specify what portion of the desired shares you are willing to accept

A short sale is when an​ investor: ​(Select the best answer​ below.)

​"borrows" a stock he or she does not own from another investor and sells the stock with the expectation that the stock is overvalued and will soon fall in price. When the price falls the investor can now purchase the stock and replace the shares borrowed prior to the sale.

If interest rates were to​ rise, the price of​ a: ​(Select the best answer​ below.)

​20-year bond would fall to a greater extent than the price of a​ 1-year bond.


Related study sets

3. Understanding Income Statements

View Set

Chapter 17: Infants, Children, and Adolescents

View Set

chemistry chapter 7: chemical formulas & compounds name the following

View Set

BII L.13 She Likes Red 她喜欢红色

View Set

Chapter 9,10, & 11 Entrepreneurship (Exam 2)

View Set

Module 43 - Antisocial Relations - Definitions

View Set