Question 1

If the board of directors approves a two-for-one stock split, an investor who owns 150 shares before the split will own ____________ shares after the split.

Accepted Answer

A)   75
B)   150
C)   225
D)   300
E)   450F) D) and E)
G) None of the above

Question 2

Since 1926, stocks as measured by the Standard & Poor's 500 Index have returned on average about 10 percent a year.

Accepted Answer

A) True 
 B)False

Question 3

From an investor's standpoint, an increase in estimates of earnings per share is a good sign.

Accepted Answer

A) True 
 B)False

Question 4

An investment bank is a financial institution that assists corporations with issuing new shares of stock.

Accepted Answer

A) True 
 B)False

Question 5

James Brewer purchased 100 shares of stock for $72 a share. James also paid $55 commission. What was the total purchase price for this transaction?

Accepted Answer

A)   $55.00
B)   $127.00
C)   $7,237.50
D)   $7,255.00
E)   $7,347.50F) A) and B)
G) D) and E)

Question 6

Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy. What type of stock is Kay thinking about adding to her portfolio?

Accepted Answer

A)   Defensive stock
B)   Cyclical stock
C)   Small cap stock
D)   Blue chip stock
E)   Growth stockF) A) and E)
G) A) and D)

Question 7

The Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Index.

Accepted Answer

A) True 
 B)False

Question 8

A market in which an investor purchases financial securities (via an investment bank or other representative)  from the issuer of those securities is called the ____________ market.

Accepted Answer

A)   technical
B)   fundamental
C)   efficient
D)   secondary
E)   primaryF) B) and E)
G) B) and D)

Question 9

A request that a stock be bought or sold at the current market price is called a ____________ order.

Accepted Answer

A)   market
B)   limit
C)   stop
D)   round
E)   discretionaryF) All of the above
G) A) and B)

Question 10

If a corporation's earnings decline, the stock's value usually increases.

Accepted Answer

A) True 
 B)False

Question 11

Stock dividends are determined by the:

Accepted Answer

A)   chief financial officer.
B)   board of directors.
C)   stockholders.
D)   corporate employees.
E)   U.S. government.F) All of the above
G) A) and E)

Question 12

A stock that sells for less than $1 per share is called a _____ stock.

Accepted Answer

A)   fractional
B)   penny
C)   dollar
D)   ten-dollar
E)   coinF) B) and E)
G) B) and C)

Question 13

A stock that remains stable during declines in the economy is called a(n)  ____________ stock.

Accepted Answer

A)   defensive
B)   cyclical
C)   growth
D)   income
E)   blue-chipF) C) and D)
G) D) and E)

Question 14

The beta of the S&P 500 is:

Accepted Answer

A)   0.
B)   1.
C)   10.
D)   50.
E)   100.F) B) and D)
G) A) and B)

Question 15

Convertible preferred stock may be exchanged, at the corporation's option, for a specified number of shares of common stock.

Accepted Answer

A) True 
 B)False

Question 16

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed?

Accepted Answer

A)   Corporate earnings
B)   Assets and liabilities
C)   Products or services
D)   Qualifications of top management
E)   All of these must be disclosed.F) B) and C)
G) All of the above

Question 17

On May 24, 2010, Kurt Rogers bought 100 shares of stock from XYZ Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How much will Kurt receive for this quarterly dividend?

Accepted Answer

A)   $0.00
B)   $1.25
C)   $12.50
D)   $125.00
E)   $0.13F) A) and E)
G) A) and C)

Question 18

Which one of the following statements is true?

Accepted Answer

A)   When buying stock on margin, an investor borrows stock from the brokerage firm.
B)   Usually, a bank arranges for the loan in a margin transaction.
C)   Investors buy on margin because doing so offers them the potential for greater profits.
D)   The margin requirement is established by the New York Stock Exchange.
E)   The current margin requirement is 25 percent.F) All of the above
G) A) and D)

Question 19

Earnings per share is a corporation's after-tax earnings divided by the number of stockholders.
Earnings per share = After-tax income/Number of shares outstanding

Accepted Answer

A) True 
 B)False

Question 20

An investment theory based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called the ____________ theory.

Accepted Answer

A)   fundamental
B)   technical analysis
C)   efficient market
D)   primary
E)   marketF) C) and E)
G) D) and E)

Exam 14: Investing in Stocks

A stock that sells for less than $1 per share is called a _____ stock.

Correct AnswerverifiedShow Answer

A market in which an investor purchases financial securities (via an investment bank or other representative) from the issuer of those securities is called the ____________ market.

Correct AnswerverifiedShow Answer

The Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of the Standard & Poor's 500 Index.

Correct AnswerverifiedShow Answer

The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed?

Correct AnswerverifiedShow Answer

A request that a stock be bought or sold at the current market price is called a ____________ order.

Correct AnswerverifiedShow Answer

Kay Powers wants to diversify her portfolio by investing in a firm that has the potential to earn above average profits compared to other firms in the economy. What type of stock is Kay thinking about adding to her portfolio?

Correct AnswerverifiedShow Answer

Earnings per share is a corporation's after-tax earnings divided by the number of stockholders. Earnings per share = After-tax income/Number of shares outstanding

Correct AnswerverifiedShow Answer

An investment bank is a financial institution that assists corporations with issuing new shares of stock.

Correct AnswerverifiedShow Answer

Since 1926, stocks as measured by the Standard & Poor's 500 Index have returned on average about 10 percent a year.

Correct AnswerverifiedShow Answer

An investment theory based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called the ____________ theory.

Correct AnswerverifiedShow Answer

Convertible preferred stock may be exchanged, at the corporation's option, for a specified number of shares of common stock.

Correct AnswerverifiedShow Answer

If a corporation's earnings decline, the stock's value usually increases.

Correct AnswerverifiedShow Answer

James Brewer purchased 100 shares of stock for $72 a share. James also paid $55 commission. What was the total purchase price for this transaction?

Correct AnswerverifiedShow Answer

From an investor's standpoint, an increase in estimates of earnings per share is a good sign.

Correct AnswerverifiedShow Answer

The beta of the S&P 500 is:

Correct AnswerverifiedShow Answer

On May 24, 2010, Kurt Rogers bought 100 shares of stock from XYZ Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How much will Kurt receive for this quarterly dividend?

Correct AnswerverifiedShow Answer

If the board of directors approves a two-for-one stock split, an investor who owns 150 shares before the split will own ____________ shares after the split.

Correct AnswerverifiedShow Answer

A stock that remains stable during declines in the economy is called a(n) ____________ stock.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Stock dividends are determined by the:

Correct AnswerverifiedShow Answer

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