Question 1

After a 2-for-1 stock split:

Accepted Answer

A)   earnings per share decrease.
B)   earnings per share increase.
C)   capitalization decreases.
D)   capitalization increases.
E)   dividend yields decrease.F) B) and D)
G) D) and E)

Question 2

A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.

Accepted Answer

A) True 
 B)False

Question 3

A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.

Accepted Answer

A)   market
B)   limit
C)   stop
D)   round
E)   discretionaryF) None of the above
G) All of the above

Question 4

Assume that you purchased 100 shares of a stock for $70 a share, that you received an annual dividend of $0.60 a share, and that you sold your stock for $80 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)

Accepted Answer

A)   $100
B)   $60
C)   $760
D)   $860
E)   $1,060F) C) and E)
G) A) and B)

Question 5

To safeguard investments, stock owners who believe the price of their stock will go down during an option period will purchase a:

Accepted Answer

A)   futures contract.
B)   long contract.
C)   call option.
D)   put option.
E)   margin contract.F) B) and C)
G) D) and E)

Question 6

If Widget Corp. has a PEG value of .5, the stock is most likely:

Accepted Answer

A)   undervalued based on its projected growth rate.
B)   overvalued based on its projected growth rate.
C)   overvalued based on its $0.50 per share dividend.
D)   overvalued based on its good historical earnings.
E)   undervalued based on its poor historical earnings.F) None of the above
G) A) and E)

Question 7

Quincy Martin Manufacturing stock has a market value of $48 a share. If the book value is $40 a share, the firm's market-to-book ratio is:

Accepted Answer

A)   0.8.
B)   1.0.
C)   1.2.
D)   2.0.
E)   2.4.F) A) and E)
G) B) and E)

Question 8

The minimum commission charged by most brokerage firms for buying and selling stock is between $5 and:

Accepted Answer

A)   $10.
B)   $25.
C)   $35.
D)   $40.
E)   $55.F) A) and B)
G) All of the above

Question 9

A stock that pays higher than average dividends is called an income stock.

Accepted Answer

A) True 
 B)False

Question 10

The stock exchange known to trade stock for innovative, growth companies is the:

Accepted Answer

A)   NYSE.
B)   NASDAQ.
C)   American Stock exchange.
D)   S & P 100.
E)   STSE.F) B) and C)
G) A) and E)

Question 11

Patsy Banz owns 220 shares of a stock. For the last calendar quarter, the company paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?

Accepted Answer

A)   $0.47
B)   $47.00
C)   $94.20
D)   $103.40
E)   $25.85F) D) and E)
G) C) and D)

Question 12

Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase?

Accepted Answer

A)   Stock option
B)   Corporate bond
C)   Government bond
D)   Preferred stock
E)   Common stockF) A) and B)
G) D) and E)

Question 13

Which one of the following is a true statement?

Accepted Answer

A)   The over-the-counter market is a network of account executives who buy and sell the securities of corporations that are not listed on a securities exchange.
B)   Account executives in the OTC market specialize or make a market in any listed security.
C)   OTC trading is for investors who want to buy or sell stocks in stores.
D)   Account executives' operating in the OTC market use specialists to help them trade securities.
E)   NASDAQ is regulated by the New York Stock Exchange.F) B) and D)
G) B) and C)

Question 14

Which one of the following statements is true?

Accepted Answer

A)   When an investor buys stocks and assumes they will increase in value, he or she is using a procedure called selling short.
B)   Selling short is selling stock that has been borrowed from a brokerage firm.
C)   When you sell short, you buy today, knowing you must sell or cover your short transaction at a later date.
D)   In a short transaction, if the stock increases in value, the investor makes money.
E)   To make money in a short transaction, you must hold on the stock for at least one year.F) A) and C)
G) All of the above

Question 15

Christopher Pratt just bought shares of common stock. Which one of the following is he entitled to based on his ownership of these shares?

Accepted Answer

A)   Semi-annual interest payments
B)   Guaranteed annual dividends
C)   Right to vote on major corporate issues
D)   Right to declare a stock split
E)   Right to declare future dividendsF) B) and C)
G) B) and E)

Question 16

Carol Fisher wants to sell the stock of Hathaway International at the next available price after the market price reaches $50 per share. What type of order should she place?

Accepted Answer

A)   Market order
B)   Limit order
C)   Stop order
D)   Discretionary order
E)   Common orderF) D) and E)
G) All of the above

Question 17

By using the internet, it is possible to find market price quotations, but more detailed financial information about a corporation is unavailable to the average investor.

Accepted Answer

A) True 
 B)False

Question 18

A defensive stock is a stock that typically sells for less than $1.

Accepted Answer

A) True 
 B)False

Question 19

When investors purchase stock on margin, they borrow stock from a stockbroker or brokerage firm.

Accepted Answer

A) True 
 B)False

Question 20

A long-term investment technique used by investors to purchase stock without paying a commission to a broker is called:

Accepted Answer

A)   dollar cost appreciation.
B)   direct investment plan.
C)   unregulated transaction.
D)   regulated transaction.
E)   over-the-counter transaction.F) A) and E)
G) None of the above

Exam 14: Investing in Stocks

The stock exchange known to trade stock for innovative, growth companies is the:

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When investors purchase stock on margin, they borrow stock from a stockbroker or brokerage firm.

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Assume that you purchased 100 shares of a stock for $70 a share, that you received an annual dividend of $0.60 a share, and that you sold your stock for $80 a share at the end of one year. What is the total return for your investment? (Ignore commission amounts for this question.)

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The minimum commission charged by most brokerage firms for buying and selling stock is between $5 and:

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A stock that pays higher than average dividends is called an income stock.

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Carol Fisher wants to sell the stock of Hathaway International at the next available price after the market price reaches $50 per share. What type of order should she place?

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Which one of the following statements is true?

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Patsy Banz owns 220 shares of a stock. For the last calendar quarter, the company paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?

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If Widget Corp. has a PEG value of .5, the stock is most likely:

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By using the internet, it is possible to find market price quotations, but more detailed financial information about a corporation is unavailable to the average investor.

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A long-term investment technique used by investors to purchase stock without paying a commission to a broker is called:

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Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase?

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Christopher Pratt just bought shares of common stock. Which one of the following is he entitled to based on his ownership of these shares?

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A defensive stock is a stock that typically sells for less than $1.

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A request that an order be executed at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.

Correct AnswerverifiedShow Answer

After a 2-for-1 stock split:

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To safeguard investments, stock owners who believe the price of their stock will go down during an option period will purchase a:

Correct AnswerverifiedShow Answer

Quincy Martin Manufacturing stock has a market value of $48 a share. If the book value is $40 a share, the firm's market-to-book ratio is:

Correct AnswerverifiedShow Answer

A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.

Correct AnswerverifiedShow Answer

Which one of the following is a true statement?

Correct AnswerverifiedShow Answer

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