D. The amount of information available about stocks is limited.
Which of the following is incorrect?
A. There is no substitute for researching a potential investment.
B. Beginning investors sometimes worry that they won't know what the information they find about stocks really means.
C. Some investors do not know wher
B. 10 percent
Since 1926, the average annual return for stocks has been about ____
A. 8 percent
B. 10 percent
C. 12 percent
D. 14 percent
E. 16 percent
B. Common stock
Amanda wants to be part of the ownership for a corporation. She should invest in
A. Bonds
B. Common stock
C. Dividends
D. A savings account
E. A proxy
B. Common stock
Another name for equity financing is money received from the sale of
A. Bonds
B. Common stock
C. Dividends
D. A savings account
E. A proxy
C. Dividend
A distribution of money, stock, or other property that is paid to owners of a company is called a
A. Bond
B. Common stock
C. Dividend
D. Savings account
E. Proxy
E. Proxy
A legal form that requests that owners transfer their voting rights to individual(s) is called a
A. Bond
B. Common stock
C. Dividend
D. Savings account
E. Proxy
B. Dividend payments must be approved by the stockholders.
All of the following statements are correct except
A. Dividends are paid out of profits.
B. Dividend payments must be approved by the stockholders.
C. A dividend can be a distribution of money, but it can also be stock or other property.
D. Dividends are
C. Alberta will receive half as much as Bobby if they owned the stock two business days before the record date
Alberta owns 100 shares of stock of ABC Company and Bobby owns 200 shares of the same stock. If ABC Company pays a $5 dividend to all stockholders with a record date of Friday, June 15, then
A. Alberta will receive the same amount as Bobby if they owned t
E. All of the above are correct
If you own stock, you may receive income from
A. Dividends
B. Appreciation in stock value
C. Possible increase in stock price due to stock splits
D. Two of the above are correct
E. All of the above are correct
A. September 12
MNOP, Inc declared a $1.00 dividend with a record date of Thursday, September 15 and a payment date of Thursday, October 20. Cheri wants to purchase stock and receive the dividend. What is the latest date that she needs to have purchased the stock in orde
B. September 13
MNOP, Inc declared a $1.00 dividend with a record date of Thursday, September 15 and a payment date of Thursday, October 20. Cheri does NOT want receive this current dividend. What is the earliest date that she should purchase the stock in order to avoid
C. The stock is trading at a high price, and the company wants to bring the price in line with a theoretical ideal range
Why does a company split its stock?
A. The stock is trading at a low price, and the company wants to increase its stock value
B. It wants fewer shares outstanding
C. The stock is trading at a high price, and the company wants to bring the price in line wi
C. If a company has a 4-for-1 split, the new number of shares will be four times as many as before the split
Which of the following statements about stock splits is correct?
A. If a company has a 2-for-1 split, the price will be doubled
B. If a company has a 3-for-1 split, the price will increase by a factor of three
C. If a company has a 4-for-1 split, the new
E. The yield on preferred stocks is often much higher than the yield on bonds
Which of the following is NOT correct regarding preferred stock?
A. Preferred stocks are considered to be safer investments than common stocks
B. Corporations that own preferred stock receive a tax break for their dividend income
C. Owners of preferred st
D. Convertible preferred stock
Daniel wants to invest in a security that can be converted to a different one that provides ownership in a company. What does he want to invest in?
A. Dividends
B. Convertible common stock
C. Proxies
D. Convertible preferred stock
E. Stock splits
E. Research the corporations she is interested in as well as their industries
Megan decided to start investing in stocks. Which of the following should she do first?
A. Base her investing decisions on hot tips she hears at work
B. Buy stocks based solely on her stockbroker's recommendation
C. Choose stocks based on a recommendation
C. The Internet provides Web sites that may be more up to date and thorough than printed materials.
Which of the following statements is correct?
A. The Internet is not to be trusted as a reliable source to evaluate potential investments.
B. Individual company websites usually charge for access to their own financial reports.
C. The Internet provides We
A. Blue chip
A safe investment that generally attracts conservative investors is called a(n) _______ stock.
A. Blue chip
B. Income
C. Micro Cap
D. Midcap
E. Penny
B. Income
An investment that pays higher than average dividends is called a(n) _______ stock.
A. Blue chip
B. Income
C. Micro Cap
D. Midcap
E. Penny
E. Penny
A stock that typically sells for less than $1 per share is called a(n) _______ stock.
A. Blue chip
B. Income
C. Micro Cap
D. Midcap
E. Penny
D. Midcap
A stock issued by a corporation that has a capitalization of between $2 and $10 billion is called a(n) _______ stock.
A. Blue chip
B. Income
C. Micro Cap
D. Midcap
E. Penny
C. Micro Cap
A stock issued by a company that has a capitalization of $250 million or less is called a _______ stock.
A. Blue chip
B. Income
C. Micro Cap
D. Midcap
E. Penny
A. Blue chip
Cliff retired ten years ago and wants to still own a few stocks. Dividends are important to him, but so is growth. He is most interested in stocks that are safe investments. He should purchase _______ stocks.
A. Blue chip
B. Cyclical
C. Micro Cap
D. Midca
C. Micro Cap
Patrick graduated from college five years ago. He has set up an emergency fund and has been paying off his student loans. In addition, he participates in the retirement plan offered by his employer. He wants to take $75 per month and invest it in very sma
E. All of the information is included
Which of the following is some of the information found on a financial Web site such as www.finance.yahoo.com?
A. Company name, last price, target price, price change
B. 52 week price range, number of shares traded (volume)
C. Market capitalization
D. Div
C. Professional advisory services such as Standard & Poor's Financial Information Services
Which of the following usually offers some free information and charges for more detailed information you may need to evaluate a stock investment?
A. Financial Web sites such as www.finance.yahoo.com
B. Personal finance Web sites such as www.smartmoney.co
C. Stock advisory services include printed detailed financial reports.
Which of the following is true?
A. Mergent's Handbook of Common Stocks is a misnomer because it only analyzes industries.
B. Standard & Poor's reports are available only in the Internet.
C. Stock advisory services include printed detailed financial report
E. All of the above are included in financial reports.
Financial reports from advisory services include all of the following sections except
A. Stock prices, earnings and dividends
B. Business summary
C. Prospects section
D. Financial Data
E. All of the above are included in financial reports.
D. Must be sent to all stockholders on an annual basis
Annual reports
A. Are available from the company for a fee
B. Are available only to current stockholders
C. Include the same information as a prospectus
D. Must be sent to all stockholders on an annual basis
E. Include estimated financial data only
E. The price/earnings ratio is the price of a share of stock divided by the corporation's earnings per share of stock.
Which of the following is correct?
A. Earnings are a minor factor in determining the value of a stock.
B. Corporate earnings are reported in the proxy statement.
C. Earnings per share uses the price of the stock in the calculation.
D. The best calculation
E. None of the above
The earnings per share equals
A. Total before-tax earnings divided by number of shares of preferred stock
B. Total before-tax earnings divided by number of shares of common stock
C. Total after-tax earnings divided by number of shares of preferred stock
D
B. The higher the price-earnings ratio, the more investors are paying for earnings.
When analyzing a price-earnings ratio,
A. A higher price-earnings ratio indicates pessimism because the price is too high compared to the earnings.
B. The higher the price-earnings ratio, the more investors are paying for earnings.
C. A low ratio indicate
D. All of the above
Which of the following is based on historical numbers?
A. Earnings
B. Earnings per share
C. Price-earnings ratio
D. All of the above
E. None of the above
E. Price-earnings ratio
If you want to compare two companies, you should use
A. Book value per share
B. Earnings per share
C. Price per share
D. Net income
E. Price-earnings ratio
B. Earnings per share
Which of the following is a profitability ratio that uses the number of outstanding shares in the calculation?
A. Book value
B. Earnings per share
C. Price per share
D. Net income
E. Price-earnings ratio
E. Price/earnings ratio
This ratio uses the market price per share of the stock and the earning per share for the last year.
A. Book value per share
B. Earnings per share
C. Market price per share
D. Net income
E. Price/earnings ratio
E. Weather
Which of the following changes would NOT cause analysts to change estimates for a healthcare corporation?
A. Interest rates
B. Unemployment rates
C. The economy in general
D. Industry
E. Weather
B. Dividend yield
This calculation uses the annual amount of money paid to investors from the company.
A. Book value
B. Dividend yield
C. Earnings per share
D. Market value
E. Price-earnings ratio
A. Book value
This equals (Assets - Liabilities)/Shares outstanding
A. Book value
B. Dividend yield
C. Earnings per share
D. Market value
E. Price-earnings
E. Total return
This calculation includes the annual dividends in dollars and the increase in the purchase price of the investment.
A. Book value
B. Capital gain
C. Market value
D. Price-earnings
E. Total return
B. Annual dividends in dollars plus capital gains
Total return equals
A. Dividend yield
B. Annual dividends in dollars plus capital gains
C. Capital gains
D. Annual dividends in dollars less capital gains
E. Capital gains less annual dividends in dollars
A. Annual dividend amount/price per share
Dividend yield equals
A. Annual dividend amount/price per share
B. Quarterly dividend amount/price per share
C. Annual dividend amount/book value per share
D. Quarterly dividend amount/book value per share
E. Annual dividend amount/earnings per share
E. (Assets - Liabilities)/Number of shares outstanding
Book value equals
A. (Assets + Liabilities)/Number of shares outstanding
B. (Liabilities - Assets)/Number of shares outstanding
C. (Assets + Liabilities)/Earnings per share
D. (Liabilities + Assets/Price-earnings ratio
E. (Assets - Liabilities)/Number of
B. Investment bank
Abe was contacted by XYZ's ____________ when XYZ wanted to sell new securities to the general public for the first time.
A. Initial public offering
B. Investment bank
C. Primary market
D. Secondary market
E. Securities exchange
A. Initial public offering
Stephen wanted to become one of the owners of GHI Corp. when it finally was available to the investors who were not directly affiliated with the company. He participated in the __________
A. Initial public offering
B. Investment bank
C. Primary market
D.
C. Primary market
Kelly bought some stock using an intermediary from the issuer of those securities. She bought her shares on the _______
A. Initial public offering
B. Investment bank
C. Primary market
D. Secondary market
E. Securities exchange
D. Secondary market
Patrick sold his GE shares using his online broker. One can say that he sold them on the ____________
A. Initial public offering
B. Investment bank
C. Primary market
D. Secondary market
E. Securities exchange
E. Securities exchanges
Jake wanted to buy and sell various stocks on the NYSE. He was using one of the largest _______________ in the world.
A. Initial public offerings
B. Investment banks
C. Primary markets
D. Secondary markets
E. Securities exchanges
E. Securities exchange
A marketplace where member brokers who represent investors meet to buy and sell securities is called a(n) ________
A. Initial public offering
B. Investment bank
C. Primary market
D. Secondary market
E. Securities exchange
E. Securities exchange
NYSE is an example of a(n) __________.
A. Initial public offering
B. Investment bank
C. Primary market
D. Secondary market
E. Securities exchange
B. New York Stock Exchange.
NYSE stands for
A. New York Securities Exchange.
B. New York Stock Exchange.
C. New York School of Engineering.
D. Never Yet So Even.
E. New Year Selling Exchange.
C. The over-the-counter market
Mohammad was interested in purchasing low value securities that were not listed on the NYSE. He probably used _____ to complete his transaction.
A. An initial public offering
B. An investment bank
C. The over-the-counter market
D. A primary market
E. The
A. Account executive
The licensed individual who buys or sells investments for his or her clients is called a(n) _____
A. Account executive
B. Account investor
C. Online executive
D. Market maker
E. Both A and B are correct
E. Market maker
Peter is a Nasdaq dealer who matches buy and sell orders for Ford. He is known as a(n) _______
A. Account executive
B. Account investor
C. Discount broker
D. Full-service broker
E. Market maker
A. Churning
Excessive buying and selling of securities to generate commissions is called
A. Churning
B. Flipping
C. Marketing
D. Prospecting
E. Scamming
C. She should focus on churning for her clients
Claudia is a licensed individual who buys or sells investment for her clients. Which of the following is NOT correct?
A. She is an account executive
B. She should NOT use her discretion without her client's approval
C. She should focus on churning for her
B. Full-service broker
Terry wants to begin investing and needs some guidance because he is uncomfortable making investment decisions. He should use a(n)
A. Discount broker
B. Full-service broker
C. Market Maker
D. Online broker
E. None of the above are correct
D. Online broker
Tammy feels quite comfortable trading her own stocks using a computer. She should use a(n)
A. Discount broker
B. Full-service broker
C. Market Maker
D. Online broker
E. All of the above are correct
A. Discount broker
Tanya understands the "how to" of researching stocks and likes to make her own decisions. However, she is not comfortable using the Internet to trade stocks. She should use a(n)
A. Discount broker
B. Full-service broker
C. Market Maker
D. Online broker
E.
E. All of these questions are appropriate to ask.
Avery is thinking about using the computer to do his investing. He should ask all of the following questions except
A. Can I manage my own investments closely?
B. Do I have sufficient computer capability?
C. How large is my investment portfolio?
D. None o
C. Market order
Mallory wants to purchase stock at the current market price. She should use a
A. Current sale order
B. Limit order
C. Market order
D. Stop order
E. Stop-loss order
B. Limit order
Devin wants to purchase DEF stock for $40.00 or less. He should use a
A. Current sale order
B. Limit order
C. Market order
D. Stop order
E. Stop-loss order
D. Stop-loss order
Gavin has owned MNOP stock for several years and has seen the stock increase in value from $20 to $35. He wants to "lock in" his gains, so he needs to place an order that will sell his stock at the next available opportunity after its market price drops t
E. His commission should be lower at an online broker than at a full-service broker.
Ethan wants to purchase some stock for the first time. Which of the following is correct?
A. His account executive should be encouraged to churn Ethan's account to maximize his return.
B. He should use an online broker to get specific advice about purchas
C. Investor
If you bought a stock on June 15, 2008 and sold it on July 15, 2009, you would likely be classified as a(n)
A. Speculator
B. Trader
C. Investor
D. Two of the above are correct
E. All of the above are correct
D. Two of the above are correct
If you bought a stock on July 1, 2009 and sold it on July 15, 2009, you may be a(n)
A. Speculator
B. Trader
C. Investor
D. Two of the above are correct
E. All of the above are correct
A. Buy-and-hold technique
Brenda purchases stock and never plans to sell them. She could be considered to be using a ______
A. Buy-and-hold technique
B. Direct investment plan
C. Direct reinvestment plan
D. Dollar cost averaging technique
E. Margin technique
B. Direct investment plan
Marissa purchases $500 of stock from a corporation without having to use an account executive or a brokerage firm. She is using a ______
A. Buy-and-hold technique
B. Direct investment plan
C. Direct reinvestment plan
D. Dollar cost averaging technique
E.
C. Dividend reinvestment plan
Rebecca owns stock that pays a dividend. She does not want the cash now; instead, she would prefer to have more shares of stock. She should use a ______
A. Buy-and-hold technique
B. Direct investment plan
C. Dividend reinvestment plan
D. Dollar cost avera
D. Dollar cost averaging technique
Timothy has $100 automatically invested in a stock each month. This way, he doesn't buy high and sell low. He is using a ______
A. Buy-and-hold technique
B. Direct investment plan
C. Direct reinvestment plan
D. Dollar cost averaging technique
E. Margin te
C. On margin
Faye sometimes borrows money from her broker to buy her stock. She is buying
A. A call option
B. A direct investment
C. On margin
D. A put option
E. A short sale
C. Buying on margin
Investors who earn larger returns because they borrow part of the money needed to by a particular stock are using which of the following techniques?
A. A call option
B. Direct investing
C. Buying on margin
D. A put option
E. Selling short
C. Buying on margin
If you buy or sell with this technique, you may be required to pledge additional collateral or cash for a loan.
A. A call option
B. Direct investing
C. Buying on margin
D. A put option
E. Selling short
E. Selling short
Ben borrowed some securities from his broker and planned to replace them at a later date. Which of the following strategies did he use?
A. A call option
B. Direct investing
C. Buying on margin
D. A put option
E. Selling short
B. Selling short is the opposite of buying long.
Which of the following is correct?
A. The broker pays you interest on money borrowed to purchase stock on margin.
B. Selling short is the opposite of buying long.
C. A put option is the right, but not the obligation to purchase a stock at a specified pric
D. A brokerage firm receives double its commission when stock is bought and sold when the investor is selling short.
Which of the following is NOT correct?
A. You pay interest on money borrowed to purchase stock on margin.
B. Selling short is the opposite of buying long.
C. A call option is the right, but not the obligation to purchase a stock at a specified price by a
A. A call option
The opportunity, but not the obligation, to buy a security within a specified period of time is
A. A call option
B. Direct investing
C. Buying on margin
D. A put option
E. A short sale
C. Buying on margin
The opportunity, but not the obligation, to sell a security within a specified period of time is
A. A call option
B. Direct investing
C. Buying on margin
E. A short sale
E. $1000.00.
Mary Sue owns 500 shares of QRS Moving Company. QRS pays a quarterly dividend of $.50 per share. What is the total annual dividend that Mary Sue will receive?
A. $.50.
B. $2.00.
C. $250.00.
D. $500.00.
E. $1000.00.
E. $2000.
Mary Jane owns 2000 shares of TUV Trucking Company. TUV pays a quarterly dividend of $.25 per share. What is the total annual dividend that Mary Jane will receive?
A. $.25.
B. $1.00.
C. $500.
D. $1000.
E. $2000.
A. $2000 loss
Gregory bought 500 shares of stock at a price of $57 per share. He later sold his stock at a price of $53. What was his total return on his investment?
A. $2000 loss
B. $57 loss
C. $4 gain
D. $2000 gain
E. $26,500 gain