Question 1

The high, inflated stock prices that occur during stock market bubbles are often driven by investor optimism and:

Accepted Answer

A)   increased corporate earnings.
B)   a low unemployment rate.
C)   changes in government regulation.
D)   irrational exuberance.
E)   economic turmoil.F) All of the above
G) C) and D)

Question 2

Valerie Kilmer owns stock in the Williams Widget Company. She was just advised that in the near future she will be receiving two shares for every one share she owns today. What has the company declared that will cause this change to her shares?

Accepted Answer

A)   Extra dividend
B)   Capital gains distribution
C)   Stock split
D)   Stock repurchase
E)   Stock conversionF) C) and D)
G) D) and E)

Question 3

Initial public offerings (IPO's)  are a ___________ investment.

Accepted Answer

A)   guaranteed
B)   speculative
C)   safe
D)   conservative
E)   blue chipF) All of the above
G) A) and B)

Question 4

A stock that pays higher than average dividends is called a(n)  ____________ stock.

Accepted Answer

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

Question 5

Because of the need for secrecy, most corporations do not supply financial information about the company on their websites.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following professional advisory services may charge a fee for you to access the more detailed information that may be needed to evaluate a stock investment?

Accepted Answer

A)   Value Line
B)   Morningstar
C)   Yahoo! Finance
D)   Value Line and Morningstar
E)   Value Line, Morningstar, and Yahoo! FinanceF) A) and D)
G) A) and C)

Question 7

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) B) and E)

Question 8

The total return on a stock is equal to the current market value of the stock minus the investor's purchase price.

Accepted Answer

A) True 
 B)False

Question 9

Jennifer Fritz is thinking about purchasing the stock of the Sunshine Corporation at the current market price. What type of order should she place?

Accepted Answer

A)   Market order
B)   Limit order
C)   Stop order
D)   Discretionary order
E)   Common orderF) None of the above
G) A) and B)

Question 10

In order for a corporation's stock to be bought and sold on the New York Stock Exchange, the corporation must meet certain requirements. Which one of the following incorrectly states one of those requirements?

Accepted Answer

A)   A corporation's annual earnings before income taxes must be at least $10 million per year for the last three consecutive he most recent three years.
B)   All of the requirements listed in the other answers are correct.
C)   The market value of its publicly held stock must exceed $25 million.
D)   A corporation must have a total of at least 400 U.S. shareholders and at least 1,100,000 total shares outstanding.
E)   A corporation must have at least $75 million in revenues for the most recent year.F) C) and E)
G) A) and B)

Question 11

Why do corporations issue stock? Why do investors buy that stock?

Accepted Answer

Corporations issue stock as a way to rai...

Question 12

Becky Martinez paid $65 a share for stock in GBX Corporation. The stock has a current market value of $48 a share and pays $1.60 a year in dividends. What is the dividend yield?

Accepted Answer

A)   2.5 percent
B)   7.4 percent
C)   3.3 percent
D)   30.0 percent
E)   40.0 percent.F) A) and C)
G) A) and E)

Question 13

A limit order allows investors to specify the price at which a security will be bought or sold.

Accepted Answer

A) True 
 B)False

Question 14

If an investor owns cumulative preferred stock, missed or omitted dividends accumulate and must be paid before any cash dividend is paid to common stockholders.

Accepted Answer

A) True 
 B)False

Question 15

A market for existing financial securities that are currently traded among investors is called the ____________ market.

Accepted Answer

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

Question 16

A stock issued by a corporation that has the potential of earning above-average profits when compared to other firms in the economy is called a(n)  ____________ stock.

Accepted Answer

A)   defensive
B)   cyclical
C)   growth
D)   income
E)   blue-chipF) A) and B)
G) None of the above

Question 17

A call option gives the purchaser the right to sell 100 shares of a stock at a guaranteed price before a definite expiration date.

Accepted Answer

A) True 
 B)False

Question 18

The date on which a shareholder must be registered on the corporation's books in order to receive dividend payments is called the:

Accepted Answer

A)   trade date.
B)   purchase date.
C)   settlement date.
D)   record date.
E)   sell date.F) B) and D)
G) B) and E)

Question 19

If a stock has a 2-for-1 split:

Accepted Answer

A)   the value of the stock is guaranteed to increase.
B)   the value of the stock is guaranteed to decrease.
C)   total market capitalization increases.
D)   total market capitalization decreases.
E)   total market capitalization does not change.F) None of the above
G) A) and E)

Question 20

Many investors and analysts believe that a corporation's ability or inability to generate earnings in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock.

Accepted Answer

A) True 
 B)False

Exam 14: Investing in Stocks

A call option gives the purchaser the right to sell 100 shares of a stock at a guaranteed price before a definite expiration date.

Correct AnswerverifiedShow Answer

Becky Martinez paid $65 a share for stock in GBX Corporation. The stock has a current market value of $48 a share and pays $1.60 a year in dividends. What is the dividend yield?

Correct AnswerverifiedShow Answer

If an investor owns cumulative preferred stock, missed or omitted dividends accumulate and must be paid before any cash dividend is paid to common stockholders.

Correct AnswerverifiedShow Answer

A stock issued by a corporation that has the potential of earning above-average profits when compared to other firms in the economy is called a(n) ____________ stock.

Correct AnswerverifiedShow Answer

In order for a corporation's stock to be bought and sold on the New York Stock Exchange, the corporation must meet certain requirements. Which one of the following incorrectly states one of those requirements?

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Because of the need for secrecy, most corporations do not supply financial information about the company on their websites.

Correct AnswerverifiedShow Answer

Why do corporations issue stock? Why do investors buy that stock?

Correct AnswerAnswered by ExamLex AICorporations issue stock as a way to rai...View AnswerShow Answer

A stock that pays higher than average dividends is called a(n) ____________ stock.

Correct AnswerverifiedShow Answer

If a stock has a 2-for-1 split:

Correct AnswerverifiedShow Answer

A market for existing financial securities that are currently traded among investors is called the ____________ market.

Correct AnswerverifiedShow Answer

The total return on a stock is equal to the current market value of the stock minus the investor's purchase price.

Correct AnswerverifiedShow Answer

Which of the following professional advisory services may charge a fee for you to access the more detailed information that may be needed to evaluate a stock investment?

Correct AnswerverifiedShow Answer

A limit order allows investors to specify the price at which a security will be bought or sold.

Correct AnswerverifiedShow Answer

Jennifer Fritz is thinking about purchasing the stock of the Sunshine Corporation at the current market price. What type of order should she place?

Correct AnswerverifiedShow Answer

Valerie Kilmer owns stock in the Williams Widget Company. She was just advised that in the near future she will be receiving two shares for every one share she owns today. What has the company declared that will cause this change to her shares?

Correct AnswerverifiedShow Answer

The date on which a shareholder must be registered on the corporation's books in order to receive dividend payments is called the:

Correct AnswerverifiedShow Answer

The high, inflated stock prices that occur during stock market bubbles are often driven by investor optimism and:

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

Many investors and analysts believe that a corporation's ability or inability to generate earnings in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock.

Correct AnswerverifiedShow Answer

Initial public offerings (IPO's) are a ___________ investment.

Correct AnswerverifiedShow Answer

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Corporations issue stock as a way to rai...
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