Question 1

The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances in a(n) :

Accepted Answer

A)  annual report.
B)  quarterly report.
C)  accountant's audit report.
D)  prospectus.
E)  stock guide.F) A) and B)
G) A) and D)

Question 2

Ms.Hart's stock club uses numerous charts that plot past price movements and other market averages to predict the future direction for the market as a whole.Her club relies on ________ analysis to determine stock selections.

Accepted Answer

A)  fundamental
B)  technical
C)  efficient market
D)  chart
E)  plotF) B) and C)
G) A) and E)

Question 3

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 4

The annualized holding period yield calculation takes into account the time the investment is held.

Accepted Answer

A) True 
 B)False

Question 5

James Brewer purchased 100 shares of stock for $73 a share.James also paid a $60 commission.What was the total purchase price for this transaction?

Accepted Answer

A)  $60.00
B)  $73.00
C)  $7,300.00
D)  $7,360.00
E)  $8,000.00F) A) and C)
G) A) and D)

Question 6

Preferred stock is often referred to as a middle investment,because it represents an investment midway between common stock and corporate bonds.

Accepted Answer

A) True 
 B)False

Question 7

To reduce anxiety when you make stock investment decisions,you should do all of the following except:

Accepted Answer

A)  Evaluate each investment.
B)  Analyze the firm's finances.
C)  Track the firm's product line.
D)  Monitor economic developments.
E)  Hold the stocks for a short time for above average returns.F) A) and C)
G) C) and D)

Question 8

If the board of directors approves a two-for-one stock split,an investor who owns 125 shares before the split will own ________ shares after the split.

Accepted Answer

A)  75
B)  125
C)  225
D)  250
E)  450F) A) and C)
G) A) and D)

Question 9

When a corporation sells stock to the general public for the first time,it is referred to as a:

Accepted Answer

A)  primary market opportunity.
B)  secondary market offering.
C)  initial public offering.
D)  investment bank offering.
E)  primary stockholder opportunity.F) B) and E)
G) C) and D)

Question 10

Sean Barber wants to invest in a stock that is relatively safe and is generally attractive to conservative investors.What type of stock best fits Sean's requirements?

Accepted Answer

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

Question 11

Acme Widget,Inc.has 1,000 shareholders who own a total of two million shares of its common stock.The company earned $20 million after taxes and paid out $8 million in dividends.The company has assets of $250 million and liabilities of $50 million.What is the book value per share?

Accepted Answer

A)  $2
B)  $8
C)  $20
D)  $100
E)  $250F) None of the above
G) D) and E)

Question 12

Many analysts believe that a corporation's ability to generate ________ in the future is one of the most significant factors that account for an increase or decrease in the price of a stock.

Accepted Answer

A)  stockholder support
B)  dividends
C)  earnings
D)  new business locations
E)  new business ideasF) B) and D)
G) B) and C)

Question 13

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 14

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

Accepted Answer

A) True 
 B)False

Question 15

Martin Manufacturing stock has a market value of $24 a share.If the book value is $20 a share,the corporation's market-to-book ratio is:

Accepted Answer

A)  0.8
B)  1.0
C)  1.2
D)  2.0
E)  2.4F) A) and B)
G) None of the above

Question 16

Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of which stock index?

Accepted Answer

A)  S&P 500 stock index
B)  Dow Jones Industrial Average
C)  NASDAQ composite index
D)  FTSE 100 index
E)  CAC 40 indexF) A) and E)
G) C) and D)

Question 17

James Green just bought a stock which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

Accepted Answer

A)  Option premium
B)  Interest
C)  Capital gain
D)  Dividend
E)  RebateF) A) and C)
G) A) and B)

Question 18

When stocks are trading at prices above their actual worth,the resulting situation is called a(n) :

Accepted Answer

A)  inflated corporate earnings.
B)  low unemployment rate.
C)  changes in government regulation.
D)  stock market bubble.
E)  economic turmoil.F) B) and D)
G) A) and B)

Question 19

When choosing a brokerage firm,an investor should consider:

Accepted Answer

A)  the amount of the commissions they charge.
B)  how much research information is available.
C)  how much research information costs.
D)  how much help you need when making an investment decision.
E)  All of theseF) A) and D)
G) A) and C)

Question 20

Earnings per share for a stock investment is calculated as:

Accepted Answer

A)  after-tax income divided by the number of stockholders.
B)  the number of stockholders divided by after-tax income.
C)  after-tax income divided by the number of shares outstanding.
D)  the number of shares outstanding divided by after-tax income.
E)  None of theseF) All of the above
G) A) and B)

Exam 14: Investing in Stocks

Martin Manufacturing stock has a market value of $24 a share.If the book value is $20 a share,the corporation's market-to-book ratio is:

Correct AnswerverifiedShow Answer

Ms.Hart's stock club uses numerous charts that plot past price movements and other market averages to predict the future direction for the market as a whole.Her club relies on ________ analysis to determine stock selections.

Correct AnswerverifiedShow Answer

James Green just bought a stock which he expects will provide him with a quarterly cash payment,although that payment is not guaranteed.In fact,he expects the amount of the payment to vary over time.What type of payment is he expecting to receive?

Correct AnswerverifiedShow Answer

The annualized holding period yield calculation takes into account the time the investment is held.

Correct AnswerverifiedShow Answer

Sean Barber wants to invest in a stock that is relatively safe and is generally attractive to conservative investors.What type of stock best fits Sean's requirements?

Correct AnswerverifiedShow Answer

When choosing a brokerage firm,an investor should consider:

Correct AnswerverifiedShow Answer

To reduce anxiety when you make stock investment decisions,you should do all of the following except:

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

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

Correct AnswerverifiedShow Answer

Many analysts believe that a corporation's ability to generate ________ in the future is one of the most significant factors that account for an increase or decrease in the price of a stock.

Correct AnswerverifiedShow Answer

The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances in a(n) :

Correct AnswerverifiedShow Answer

Earnings per share for a stock investment is calculated as:

Correct AnswerverifiedShow Answer

Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of which stock index?

Correct AnswerverifiedShow Answer

If the board of directors approves a two-for-one stock split,an investor who owns 125 shares before the split will own ________ shares after the split.

Correct AnswerverifiedShow Answer

When stocks are trading at prices above their actual worth,the resulting situation is called a(n) :

Correct AnswerverifiedShow Answer

James Brewer purchased 100 shares of stock for $73 a share.James also paid a $60 commission.What was the total purchase price for this transaction?

Correct AnswerverifiedShow Answer

When a corporation sells stock to the general public for the first time,it is referred to as a:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Preferred stock is often referred to as a middle investment,because it represents an investment midway between common stock and corporate bonds.

Correct AnswerverifiedShow Answer

Acme Widget,Inc.has 1,000 shareholders who own a total of two million shares of its common stock.The company earned $20 million after taxes and paid out $8 million in dividends.The company has assets of $250 million and liabilities of $50 million.What is the book value per share?

Correct AnswerverifiedShow Answer

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