Question 1
Aeryn Soon is a potential investor of Hippy Dippy Inc.'s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays an annual dividend of $40, and Aeryn's required return is 8 percent. Should she purchase this preferred stock or NOT? Why?
Yes, because the value of the preferred stock is $500.
No, because the value of the preferred stock is $250.
Yes, because the value of the preferred stock is $250.
No, because the value of the preferred stock is $500.
Question 2
Corporate bonds often have a ________, a contractual term that allows the firm to repay the bond before the maturity date.
bearer provision
maturity date provision
convertible provision
call provision
Question 3
Which of the following statements regarding bonds and inflation risk is true?
Bond investors will require higher yields on bonds if inflation rises.
Long-term bonds have less inflation risk than short-term bonds.
Rising inflation will generally cause bond prices to also rise.
Bonds are less influenced by inflation risk than are common stocks.
Question 4
A written agreement that gives your common stock voting rights to someone else is known as a
preemptive right.
voting assignment.
proxy.
forfeit agreement.
Question 5
A corporate bond has a 9.4 percent coupon rate. The bond has a $1,000 face value and is currently selling at $900. The annual coupon payment on this bond is
$94.00.
$84.60.
$108.70.
$97.83.
Question 6
What feature of preferred stock allows shareholders to change their preferred stock into common stock?
convertibility
portability
callability
par value
Question 7
Dell is an American computer company. The founder, Michael Dell, and global technology investment firm, Silver Lake Partners, own all of the shares of Dell. It is not possible to buy shares of Dell stock on the secondary market because Dell is a
public corporation.
sole proprietorship.
partnership.
private corporation.
Question 8
If you purchase shares of preferred stock and interest rates on similar risk securities later go up, what will happen to the market value of your stock?
It will increase.
It will decrease.
It will stay the same.
There is insufficient information to determine what will happen
Question 9
When brokers engage in excessive trading of customers accounts in order to increase their commissions, this is called
churning.
discretionary trading.
whipsawing.
insider trading.
Question 10
When a stock split occurs,
the market usually views the split as bad news about future prospects for the company.
the price of new shares is lower than the old price.
the company expects the value of shares to go down in the future.
owners of stock end up with a lower proportionate number of shares.
Question 11
Investors that buy bonds often do so because bonds
are higher risk than stocks.
have a higher return potential than stocks.
provide a predictable income stream.
are risk-free.
Question 12
It is illegal for insiders to
trade on company information not available to the public.
trade on any information about the company in which they are insiders.
own stock in the company in which they are insiders.
sell stock in the company as long as they are insiders.
Question 13
When planning for mutual fund costs, a common concept is the fund's ________ ratio, measured by the expenses per dollar of assets under management.
expense
fund
liquidity
dollar
Question 14
Which is the first step out of the four steps in the mutual fund selection process?
Identify your investment objective.
Decide which fund classifications are appropriate for your objective.
Compare funds based on risk and return, costs, and services.
Buy shares in the selected funds.
Question 15
The basic equation for real estate return on investment is the increase in value plus the net rental income, minus the interest expense, all of which is divided by which financial component?
beginning investment
capital appreciation
ending outlay
market price
Question 16
Sam Drexler is thinking of directly investing in real estate. Which is NOT a direct investment choice for Sam?
mortgage-backed securities
rental property
vacant lots
commercial property
Question 17
Which statement regard REITs is false?
Unlike UITs, REITs have a limited lifespan.
Equity REITs make direct investments in rental and commercial property.
REITs are a type of closed-end investment company.
REITs must distribute 90 percent of taxable income to shareholders each year.
Question 18
Pug Marbury is looking at some indirect investment choices and notices one of them acts a lot like a mutual fund. Which of the following choices has he likely come across?
real estate investment trust
mortgage-backed security
limited partnership
commercial property
Question 19
Which benefit of investing in mutual funds pertains to the ability to sell your shares at market price due to a large demand for mutual fund assets?
Liquidity
Withdrawal option
Dividend reinvestment
Diversification
Question 20
Which statement is false regarding exchange-traded funds?
Many exchange-traded funds are designed to be index funds.
Exchange-traded funds are examples of closed-end funds.
Share prices on an exchange-traded fund are determined by market forces.
All of the choices are true.
Question 21
Most open-end mutual funds charge a front-end load, which is
a sales charge or commission paid by investors each year that they own shares in the fund.
a brokerage fee that is paid to a broker for selling mutual funds in the secondary market for an investor.
the annual expenses on the fund divided by the net asset value.
a sales charge or commission paid by an investor when purchasing shares in a mutual fund.
Question 22
Assets minus liabilities, per share, is known as the
net asset value.
open-end value.
unit investment.
return index.
Question 23
A(n) ________ contract is a contract in which you promise to buy or sell the underlying asset at a point in the future for a price determined today.
futures
forward
treasury
annuities
Question 24
A mutual fund that invests in a mix of equity and fixed income securities is a(n):
balanced or hybrid fund.
value fund.
growth fund.
income fund.
Question 25
The net asset value of a mutual fund that is worth $100 million, has liabilities of $5 million, and has 5 million shares is
$100 million
$95 million
$19 per share
$1 per share
Aeryn Soon is a potential investor of Hippy Dippy Inc.'s preferred stock, which is currently selling for $475 per share. Hippy Dippy pays an annual dividend of $40, and Aeryn's required return is 8 percent. Should she purchase this preferred stock or NOT? Why?
Yes, because the value of the preferred stock is $500.
No, because the value of the preferred stock is $250.
Yes, because the value of the preferred stock is $250.
No, because the value of the preferred stock is $500.
Question 2
Corporate bonds often have a ________, a contractual term that allows the firm to repay the bond before the maturity date.
bearer provision
maturity date provision
convertible provision
call provision
Question 3
Which of the following statements regarding bonds and inflation risk is true?
Bond investors will require higher yields on bonds if inflation rises.
Long-term bonds have less inflation risk than short-term bonds.
Rising inflation will generally cause bond prices to also rise.
Bonds are less influenced by inflation risk than are common stocks.
Question 4
A written agreement that gives your common stock voting rights to someone else is known as a
preemptive right.
voting assignment.
proxy.
forfeit agreement.
Question 5
A corporate bond has a 9.4 percent coupon rate. The bond has a $1,000 face value and is currently selling at $900. The annual coupon payment on this bond is
$94.00.
$84.60.
$108.70.
$97.83.
Question 6
What feature of preferred stock allows shareholders to change their preferred stock into common stock?
convertibility
portability
callability
par value
Question 7
Dell is an American computer company. The founder, Michael Dell, and global technology investment firm, Silver Lake Partners, own all of the shares of Dell. It is not possible to buy shares of Dell stock on the secondary market because Dell is a
public corporation.
sole proprietorship.
partnership.
private corporation.
Question 8
If you purchase shares of preferred stock and interest rates on similar risk securities later go up, what will happen to the market value of your stock?
It will increase.
It will decrease.
It will stay the same.
There is insufficient information to determine what will happen
Question 9
When brokers engage in excessive trading of customers accounts in order to increase their commissions, this is called
churning.
discretionary trading.
whipsawing.
insider trading.
Question 10
When a stock split occurs,
the market usually views the split as bad news about future prospects for the company.
the price of new shares is lower than the old price.
the company expects the value of shares to go down in the future.
owners of stock end up with a lower proportionate number of shares.
Question 11
Investors that buy bonds often do so because bonds
are higher risk than stocks.
have a higher return potential than stocks.
provide a predictable income stream.
are risk-free.
Question 12
It is illegal for insiders to
trade on company information not available to the public.
trade on any information about the company in which they are insiders.
own stock in the company in which they are insiders.
sell stock in the company as long as they are insiders.
Question 13
When planning for mutual fund costs, a common concept is the fund's ________ ratio, measured by the expenses per dollar of assets under management.
expense
fund
liquidity
dollar
Question 14
Which is the first step out of the four steps in the mutual fund selection process?
Identify your investment objective.
Decide which fund classifications are appropriate for your objective.
Compare funds based on risk and return, costs, and services.
Buy shares in the selected funds.
Question 15
The basic equation for real estate return on investment is the increase in value plus the net rental income, minus the interest expense, all of which is divided by which financial component?
beginning investment
capital appreciation
ending outlay
market price
Question 16
Sam Drexler is thinking of directly investing in real estate. Which is NOT a direct investment choice for Sam?
mortgage-backed securities
rental property
vacant lots
commercial property
Question 17
Which statement regard REITs is false?
Unlike UITs, REITs have a limited lifespan.
Equity REITs make direct investments in rental and commercial property.
REITs are a type of closed-end investment company.
REITs must distribute 90 percent of taxable income to shareholders each year.
Question 18
Pug Marbury is looking at some indirect investment choices and notices one of them acts a lot like a mutual fund. Which of the following choices has he likely come across?
real estate investment trust
mortgage-backed security
limited partnership
commercial property
Question 19
Which benefit of investing in mutual funds pertains to the ability to sell your shares at market price due to a large demand for mutual fund assets?
Liquidity
Withdrawal option
Dividend reinvestment
Diversification
Question 20
Which statement is false regarding exchange-traded funds?
Many exchange-traded funds are designed to be index funds.
Exchange-traded funds are examples of closed-end funds.
Share prices on an exchange-traded fund are determined by market forces.
All of the choices are true.
Question 21
Most open-end mutual funds charge a front-end load, which is
a sales charge or commission paid by investors each year that they own shares in the fund.
a brokerage fee that is paid to a broker for selling mutual funds in the secondary market for an investor.
the annual expenses on the fund divided by the net asset value.
a sales charge or commission paid by an investor when purchasing shares in a mutual fund.
Question 22
Assets minus liabilities, per share, is known as the
net asset value.
open-end value.
unit investment.
return index.
Question 23
A(n) ________ contract is a contract in which you promise to buy or sell the underlying asset at a point in the future for a price determined today.
futures
forward
treasury
annuities
Question 24
A mutual fund that invests in a mix of equity and fixed income securities is a(n):
balanced or hybrid fund.
value fund.
growth fund.
income fund.
Question 25
The net asset value of a mutual fund that is worth $100 million, has liabilities of $5 million, and has 5 million shares is
$100 million
$95 million
$19 per share
$1 per share
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