Question 1

Which of the following is a true statement?

Accepted Answer

A)   A corporation generally obtains equity capital from bondholders.
B)   A corporation must issue either preferred stock or common stock but not both.
C)   When a corporation is experiencing financial problems, an investor should purchase common rather than preferred stock.
D)   Most corporations sell options to satisfy a large part of their financing needs.
E)   A stock split may not cause a stock's value to increase.F) A) and B)
G) All of the above

Question 2

Once you have painstakingly developed a financial plan, it is unwise to change it.

Accepted Answer

A) True 
 B)False

Question 3

An emergency fund should be deposited in a:

Accepted Answer

A)   savings account at the highest available interest rate.
B)   six-month certificate of deposit.
C)   checking account.
D)   safe place at home.
E)   safe deposit box in a bank vault.F) None of the above
G) B) and E)

Question 4

A corporation must give each potential investor an annual report.

Accepted Answer

A) True 
 B)False

Question 5

Accurate recordkeeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.

Accepted Answer

A) True 
 B)False

Question 6

A corporation selling stock is obligated to:

Accepted Answer

A)   guarantee the shareholders' investment.
B)   repay money obtained from the sale of that stock.
C)   repurchase shares of stock at a later date.
D)   pay dividends to the common shareholders.
E)   pay dividends to preferred stockholders prior to common stockholders.F) A) and B)
G) A) and C)

Question 7

Standard & Poor's and Value Line are companies that would be examples of:

Accepted Answer

A)   stockbrokers.
B)   securities exchanges.
C)   stock regulations.
D)   investors' services.
E)   stock underwriters.F) B) and E)
G) A) and E)

Question 8

If interest rates in the overall economy decrease to 6 percent, which one of the following is most likely to be the market value of a $1,000 corporate bond with a fixed interest rate of 7 percent?

Accepted Answer

A)   $400
B)   $1,100
C)   $900
D)   $1,000
E)   $700Since the market rate is less than the coupon rate, the market price should exceed $1,000.F) B) and D)
G) B) and C)

Question 9

If interest rates in the overall economy increase to 8 percent, which one of the following is most likely to be the market value of a $1,000 corporate bond with a fixed interest rate of 7 percent?

Accepted Answer

A)   $0
B)   $1,100
C)   $900
D)   $1,000
E)   $1,300Since the market rate is greater than the coupon rate, the market price should be less than $1,000.F) A) and B)
G) C) and E)

Question 10

If interest rates in the overall economy decrease, what will happen to the market value of a corporate bond with a fixed interest rate?

Accepted Answer

A)   The bond will lose all its value.
B)   The value of the bond will increase.
C)   The value of the bond will decrease.
D)   The value of the bond will not change.
E)   It is impossible to determine if the bond's value will increase, decrease, or remain constant.F) A) and E)
G) A) and C)

Question 11

The maximum dollar amount that can be borrowed using the cash advance provision on a credit card is called the:

Accepted Answer

A)   credit ceiling.
B)   finance charge.
C)   interest rate.
D)   line of credit.
E)   rate of return.F) A) and B)
G) All of the above

Question 12

Which one of these is not an example of systematic risk?

Accepted Answer

A)   Recession
B)   Inflation
C)   Political upheaval such as war
D)   Decline in the auto industry
E)   Decline in national economyF) B) and D)
G) B) and E)

Question 13

Which one of the following investments would provide the most predictable source of income?

Accepted Answer

A)   Commodities
B)   Options
C)   Precious metals
D)   Common stock
E)   Government bondsF) D) and E)
G) B) and C)

Question 14

Which one of the following is not a warning sign that you might be getting into credit card trouble?

Accepted Answer

A)   Paying off your credit card balance off each month
B)   Using your credit card to pay for small purchases
C)   Taking advantage of the cash advance feature
D)   Using a large number of credit cards
E)   Using the cash advance feature of one credit card to occasionally pay the monthly payment on another credit cardF) B) and E)
G) B) and D)

Question 15

Because of the age factor, younger investors tend to invest a large percentage of their nest egg in what types of investments?

Accepted Answer

A)   Speculative stocks
B)   Commodities
C)   Municipal bonds
D)   Growth-oriented mutual funds
E)   Certificates of depositF) D) and E)
G) C) and D)

Question 16

Twenty years ago, you began investing $2,000 a year. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $92,000. How much did you earn on your investments over the 20-year period of time?

Accepted Answer

A)   $2,000
B)   $40,000
C)   $52,000
D)   $92,000
E)   $132,000F) A) and C)
G) B) and D)

Question 17

The most important priority for an investor in preferred stock is receiving cash dividends before common stockholders are paid any cash dividends.

Accepted Answer

A) True 
 B)False

Question 18

Which type of risk affects only a specific company or a specific industry?

Accepted Answer

A)   Interest rate
B)   Systematic
C)   Unsystematic
D)   Economic
E)   InflationF) None of the above
G) A) and B)

Question 19

A good rule of thumb is to limit consumer credit payments to ____________ percent of your net monthly income.

Accepted Answer

A)   20
B)   30
C)   40
D)   50
E)   60F) B) and D)
G) A) and E)

Question 20

Chris O'Donnell is thinking about investing in an investment that is high-risk in the hopes of earning a relatively large profit in a short amount of time. Which investment is he most likely considering?

Accepted Answer

A)   U.S. Treasury bill
B)   Certificate of deposit
C)   Low-growth stock
D)   Speculative stock
E)   Low-risk bondF) A) and C)
G) C) and D)

Exam 13: Investing Fundamentals

A corporation must give each potential investor an annual report.

Correct AnswerverifiedShow Answer

Twenty years ago, you began investing $2,000 a year. Because your investments earned an average of 8 percent a year, your investment portfolio has a current dollar value of $92,000. How much did you earn on your investments over the 20-year period of time?

Correct AnswerverifiedShow Answer

Standard & Poor's and Value Line are companies that would be examples of:

Correct AnswerverifiedShow Answer

Accurate recordkeeping can help you spot opportunities to maximize profits or reduce dollar losses when you sell your investments.

Correct AnswerverifiedShow Answer

Which one of these is not an example of systematic risk?

Correct AnswerverifiedShow Answer

If interest rates in the overall economy decrease, what will happen to the market value of a corporate bond with a fixed interest rate?

Correct AnswerverifiedShow Answer

Once you have painstakingly developed a financial plan, it is unwise to change it.

Correct AnswerverifiedShow Answer

The maximum dollar amount that can be borrowed using the cash advance provision on a credit card is called the:

Correct AnswerverifiedShow Answer

A good rule of thumb is to limit consumer credit payments to ____________ percent of your net monthly income.

Correct AnswerverifiedShow Answer

Which of the following is a true statement?

Correct AnswerverifiedShow Answer

Which type of risk affects only a specific company or a specific industry?

Correct AnswerverifiedShow Answer

If interest rates in the overall economy increase to 8 percent, which one of the following is most likely to be the market value of a $1,000 corporate bond with a fixed interest rate of 7 percent?

Correct AnswerverifiedShow Answer

The most important priority for an investor in preferred stock is receiving cash dividends before common stockholders are paid any cash dividends.

Correct AnswerverifiedShow Answer

If interest rates in the overall economy decrease to 6 percent, which one of the following is most likely to be the market value of a $1,000 corporate bond with a fixed interest rate of 7 percent?

Correct AnswerverifiedShow Answer

A corporation selling stock is obligated to:

Correct AnswerverifiedShow Answer

An emergency fund should be deposited in a:

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Which one of the following is not a warning sign that you might be getting into credit card trouble?

Correct AnswerverifiedShow Answer

Chris O'Donnell is thinking about investing in an investment that is high-risk in the hopes of earning a relatively large profit in a short amount of time. Which investment is he most likely considering?

Correct AnswerverifiedShow Answer

Because of the age factor, younger investors tend to invest a large percentage of their nest egg in what types of investments?

Correct AnswerverifiedShow Answer

Which one of the following investments would provide the most predictable source of income?

Correct AnswerverifiedShow Answer

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