Question 1

Matthew Boyd has saved $10,000 and wants to invest in common stock. Identify three investment methods he could use and briefly explain how each of those methods works.

Accepted Answer

1. Direct Stock Purchase: Matthew could ...

Question 2

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

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) A) and D)

Question 3

Equity financing is a popular choice to provide long-term financing for a corporation because:

Accepted Answer

A)   a lender is always available to provide this type of financing.
B)   it does not have to be repaid.
C)   repayment doesn't have to be made for ten years or more.
D)   only interest must be paid for the first five years.
E)   it does not cost anything to sell in the primary market.F) A) and E)
G) B) and C)

Question 4

Which type of preferred stock can be exchanged for common stock at the stockholder's option?

Accepted Answer

A)   None of these
B)   Convertible
C)   Participating
D)   Cumulative
E)   CallableF) C) and D)
G) B) and E)

Question 5

Common stock dividends are paid out of profits and:

Accepted Answer

A)   must be approved by the firm's board of directors.
B)   are guaranteed to be paid quarterly.
C)   are paid prior to the firm's taxes.
D)   usually paid semi-annually.
E)   equal 100 percent of the firm's annual earnings.F) A) and B)
G) A) and C)

Question 6

Assume the beta for the stock market in general is 1.0 and the beta for World-Wide Television Productions is 2.4. If the stock market increases in value by 10 percent, what is the expected increase in value for the World-Wide Productions stock?

Accepted Answer

A)   12 percent
B)   20 percent
C)   24 percent
D)   48 percent
E)   14 percentF) B) and C)
G) A) and E)

Question 7

The record date is the date that the actual dividend payment is made to stockholders.

Accepted Answer

A) True 
 B)False

Question 8

A blue-chip stock is too speculative for most investors.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

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

Question 10

An investment theory based on the assumption that stock price movements are purely random is called the ____________ theory.

Accepted Answer

A)   fundamental
B)   technical
C)   efficient market
D)   primary
E)   marketF) All of the above
G) D) and E)

Question 11

Stocks issued by large corporations in mature industries often have high P-E ratios.

Accepted Answer

A) True 
 B)False

Question 12

A proxy is a legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individual or individuals.

Accepted Answer

A) True 
 B)False

Question 13

A very safe investment that generally attracts conservative investors is called a(n)  ____________ stock.

Accepted Answer

A)   penny
B)   cyclical
C)   growth
D)   small cap
E)   blue chipF) A) and D)
G) A) and C)

Question 14

Arnell Johnson bought 200 shares of Black Petroleum Company for $95 per share and paid a commission of $60. He sold the stock five years later for $120 per share and paid $75 commission. While he held the stock, it paid a dividend of $5.50 per share. What was Arnell's total dollar return on this stock?

Accepted Answer

A)   $5,000
B)   $4,865
C)   $1,100
D)   $6,100
E)   $5,965F) A) and B)
G) A) and D)

Question 15

Book value per share is determined by:

Accepted Answer

A)   deducting liabilities from assets and dividing the remainder by owner's equity.
B)   deducting liabilities from assets and dividing the remainder by the number of shares of stock outstanding.
C)   dividing liabilities by the number of shares of stock outstanding.
D)   dividing assets by the number of shares of stock outstanding.
E)   dividing the sum of assets and owner's equity by the number of shares of stock outstanding.F) D) and E)
G) A) and D)

Question 16

It is common for professional advisory services like Morningstar, Standard & Poor's, and Value Line to charge for more detailed financial information than provided on other Internet Websites.

Accepted Answer

A) True 
 B)False

Question 17

Dividends remain with the stock until:

Accepted Answer

A)   two business days before the date of record.
B)   two business days after the date of record.
C)   three days before the date of record.
D)   three days after the date of record.
E)   three days before the actual payment date.F) A) and D)
G) A) and C)

Question 18

A large-cap stock is a stock issued by a company that has a capitalization in excess of how much?

Accepted Answer

A)   $10 billion
B)   $20 billion
C)   $30 billion
D)   $40 billion
E)   $50 billionF) D) and E)
G) C) and D)

Question 19

Which one of the following statements is false?

Accepted Answer

A)   Numerical measures can help investors decide if it is time to buy or sell a stock.
B)   Future earnings may be one of the most significant measures to examine when evaluating a stock.
C)   Higher earnings generally equate to higher stock value.
D)   Corporate earnings are reported in a firm's annual report.
E)   To date, it is impossible to determine corporate earnings by using the internet.F) A) and B)
G) D) and E)

Question 20

Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the firm's earnings per share?

Accepted Answer

A)   $3.00
B)   $2.00
C)   $1.50
D)   $0.67
E)   $0.75F) None of the above
G) A) and C)

Exam 14: Investing in Stocks

Equity financing is a popular choice to provide long-term financing for a corporation because:

Correct Answer
verified

It is common for professional advisory services like Morningstar, Standard & Poor's, and Value Line to charge for more detailed financial information than provided on other Internet Websites.

Correct Answer
verified

A very safe investment that generally attracts conservative investors is called a(n) ____________ stock.

Correct Answer
verified

Stocks issued by large corporations in mature industries often have high P-E ratios.

Correct Answer
verified

Dividends remain with the stock until:

Correct Answer
verified

The record date is the date that the actual dividend payment is made to stockholders.

Correct Answer
verified

Which type of preferred stock can be exchanged for common stock at the stockholder's option?

Correct Answer
verified

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

Correct Answer
verified

A large-cap stock is a stock issued by a company that has a capitalization in excess of how much?

Correct Answer
verified

Matthew Boyd has saved $10,000 and wants to invest in common stock. Identify three investment methods he could use and briefly explain how each of those methods works.

Correct Answer
Answered by ExamLex AI
1. Direct Stock Purchase: Matthew could ...
View Answer

Correct Answer
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Which one of the following statements is false?

Correct Answer
verified

Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the firm's earnings per share?

Correct Answer
verified

Assume the beta for the stock market in general is 1.0 and the beta for World-Wide Television Productions is 2.4. If the stock market increases in value by 10 percent, what is the expected increase in value for the World-Wide Productions stock?

Correct Answer
verified

A blue-chip stock is too speculative for most investors.

Correct Answer
verified

Book value per share is determined by:

Correct Answer
verified

Common stock dividends are paid out of profits and:

Correct Answer
verified

A proxy is a legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individual or individuals.

Correct Answer
verified

An investment theory based on the assumption that stock price movements are purely random is called the ____________ theory.

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Investing in Stocks

Equity financing is a popular choice to provide long-term financing for a corporation because:

Correct AnswerverifiedShow Answer

It is common for professional advisory services like Morningstar, Standard & Poor's, and Value Line to charge for more detailed financial information than provided on other Internet Websites.

Correct AnswerverifiedShow Answer

A very safe investment that generally attracts conservative investors is called a(n) ____________ stock.

Correct AnswerverifiedShow Answer

Stocks issued by large corporations in mature industries often have high P-E ratios.

Correct AnswerverifiedShow Answer

Dividends remain with the stock until:

Correct AnswerverifiedShow Answer

The record date is the date that the actual dividend payment is made to stockholders.

Correct AnswerverifiedShow Answer

Which type of preferred stock can be exchanged for common stock at the stockholder's option?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A large-cap stock is a stock issued by a company that has a capitalization in excess of how much?

Correct AnswerverifiedShow Answer

Matthew Boyd has saved $10,000 and wants to invest in common stock. Identify three investment methods he could use and briefly explain how each of those methods works.

Correct AnswerAnswered by ExamLex AI1. Direct Stock Purchase: Matthew could ...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the firm's earnings per share?

Correct AnswerverifiedShow Answer

Assume the beta for the stock market in general is 1.0 and the beta for World-Wide Television Productions is 2.4. If the stock market increases in value by 10 percent, what is the expected increase in value for the World-Wide Productions stock?

Correct AnswerverifiedShow Answer

A blue-chip stock is too speculative for most investors.

Correct AnswerverifiedShow Answer

Book value per share is determined by:

Correct AnswerverifiedShow Answer

Common stock dividends are paid out of profits and:

Correct AnswerverifiedShow Answer

A proxy is a legal form that lists the issues to be decided at a stockholders' meeting and requests that stockholders transfer their voting rights to some individual or individuals.

Correct AnswerverifiedShow Answer

An investment theory based on the assumption that stock price movements are purely random is called the ____________ theory.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
Answered by ExamLex AI
1. Direct Stock Purchase: Matthew could ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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