Question 1

Which one of the following statements is true?

Accepted Answer

A)  Board members are appointed by a company's management.
B)  Stockholders receive a tax break on dividend income.
C)  Investors should be concerned about the corporation's ability to earn profits and pay dividends in the future.
D)  If a cash dividend is declared by the board of directors, each stockholder will receive a different dollar amount depending on the length of time they have owned their shares.
E)  Corporate dividends are always paid in cash.F) C) and D)
G) A) and E)

Question 2

A securities exchange is a marketplace where member brokers,who represent investors,meet to buy and sell securities.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Assume that you purchased 100 shares of a stock for $55 a share,that you received an annual dividend of $2.00 a share,and that you sold your stock for $65 a share at the end of one year.What is the total return on your investment?

Accepted Answer

A)  $200
B)  $1,000
C)  $1,200
D)  $1,500
E)  $2,200F) A) and B)
G) A) and C)

Question 5

Last year,High-Tech Electronics earned $1.50 per share.If the current market value for a share of its stock is $45,what is the firm's P-E ratio?

Accepted Answer

A)  0.03
B)  3.30
C)  30.00
D)  33.00
E)  45.00F) C) and D)
G) All of the above

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) All of the above
G) None of the above

Question 7

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) A) and B)
G) All of the above

Question 8

An increase in a corporation's earnings per share is a healthy sign.

Accepted Answer

A) True 
 B)False

Question 9

A market order is a request to buy or sell a stock at the current market value.

Accepted Answer

A) True 
 B)False

Question 10

Barker Creek Clothing has after-tax income of $12.8 million and its earnings per share are $0.40.How many shares of stock does it have outstanding?

Accepted Answer

A)  2 million
B)  3.1 million
C)  12.8 million
D)  32 million
E)  40 millionF) C) and D)
G) A) and B)

Question 11

Explain what dollar cost averaging is and why an investor would use the technique.

Accepted Answer

Dollar cost averaging is a long-term tec...

Question 12

Describe information that may help you decide whether to use a full-service,discount,or on-line brokerage firm.

Accepted Answer

Full service: Beginning investors with l...

Question 13

Approximately ____ percent of earnings are distributed as dividends by financially secure corporations.

Accepted Answer

A)  10 to 20
B)  20 to 30
C)  70 to 90
D)  40 to 60
E)  100F) A) and D)
G) C) and D)

Question 14

The minimum commission charged by most brokerage firms for buying or selling stock is between $5 and $25.

Accepted Answer

A) True 
 B)False

Question 15

Both limit and _____orders may be good for one day,one week,one month,good until canceled,or a specified date.

Accepted Answer

A)  stop loss
B)  limit
C)  stop
D)  round
E)  discretionaryF) C) and E)
G) B) and D)

Question 16

If Widget Corp.has a PEG value of .50,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) A) and B)
G) A) and C)

Question 17

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Accepted Answer

A) True 
 B)False

Question 18

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 19

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called:

Accepted Answer

A)  dollar cost averaging.
B)  dividend reinvestment plan.
C)  buy and hold technique.
D)  regulated transaction.
E)  secured transaction.F) A) and B)
G) A) and C)

Question 20

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 to buy more stock and therefore earn larger returns.
D)  The margin requirement is established by the New York Stock Exchange.
E)  The current margin requirement is 25 percent.F) C) and E)
G) A) and E)

Exam 14: Investing in Stock

Stock owners who believe the price of their stock will go down during an option period will purchase a:

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

Approximately ____ percent of earnings are distributed as dividends by financially secure corporations.

Correct AnswerverifiedShow Answer

Describe information that may help you decide whether to use a full-service,discount,or on-line brokerage firm.

Correct AnswerverifiedFull service: Beginning investors with l...View AnswerShow 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 Stock Index.

Correct AnswerverifiedShow Answer

An increase in a corporation's earnings per share is a healthy sign.

Correct AnswerverifiedShow Answer

A securities exchange is a marketplace where member brokers,who represent investors,meet to buy and sell securities.

Correct AnswerverifiedShow Answer

The minimum commission charged by most brokerage firms for buying or selling stock is between $5 and $25.

Correct AnswerverifiedShow Answer

Explain what dollar cost averaging is and why an investor would use the technique.

Correct AnswerverifiedDollar cost averaging is a long-term tec...View AnswerShow 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

Barker Creek Clothing has after-tax income of $12.8 million and its earnings per share are $0.40.How many shares of stock does it have outstanding?

Correct AnswerverifiedShow Answer

Last year,High-Tech Electronics earned $1.50 per share.If the current market value for a share of its stock is $45,what is the firm's P-E ratio?

Correct AnswerverifiedShow Answer

A market order is a request to buy or sell a stock at the current market value.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Assume that you purchased 100 shares of a stock for $55 a share,that you received an annual dividend of $2.00 a share,and that you sold your stock for $65 a share at the end of one year.What is the total return on your investment?

Correct AnswerverifiedShow Answer

A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called:

Correct AnswerverifiedShow Answer

If Widget Corp.has a PEG value of .50,the stock is most likely:

Correct AnswerverifiedShow Answer

Both limit and _____orders may be good for one day,one week,one month,good until canceled,or a specified date.

Correct AnswerverifiedShow Answer

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

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Full service: Beginning investors with l...
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Dollar cost averaging is a long-term tec...
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