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BUSI 223 Quiz 6 solutions complete answers
BUSI 223 Quiz 6 solutions complete answers
Earnings per share for a stock investment is calculated as:
When choosing a brokerage firm, an investor should consider:
Which one of the following statements is true regarding buying stock on margin?
To calculate dividend yield, the annual dividend amount per share is divided by the _______ per share.
Regardless of a stock’s classification, a stock is a(n) _____ investment because there are no guarantees.
Which of the following are owned by a company and can be used to secure a mortgage bond?
Which one of the following is issued by state and local governments?
Because of the added security of collateral, the interest rates on _____bonds are usually lower than interest rates on unsecured debenture bonds.
Which one of the following bonds would likely have the lowest risk?
A bond that is backed only by the reputation of the issuing corporation is called a(n) ____________ bond.
A mutual fund that invests in companies expecting higher-than-average revenue and earnings growth is called a(n) ____________ fund.
Nathan Fuller is buying shares in a mutual fund that invests in the same companies as those found in the Standard & Poor’s 500. What type of mutual fund is he buying?
Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?
The current market value of a mutual fund's portfolio minus the mutual fund's liabilities equals a figure, that when divided by the number of shares outstanding, results in the:
Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose prices are expected to increase dramatically in a short period of time. What type of mutual fund is he purchasing?
You own a $1,000 bond that pays 9 percent interest. What is the amount of interest you will receive each six months?
June Tavia is trying to calculate the taxable equivalent yield for a municipal bond. If the bond she owns pays 4 percent interest and she is in the 34 percent tax bracket, what is the taxable-equivalent yield (round to nearest percent)?
Elizabeth Cherry has a bond that has 10 years to maturity, a face value of $1,000, an 8.5% interest rate, and a market price of $1,500. What is the dollar amount of annual interest on this bond?
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.
A $1,000 corporate bond is convertible to 40 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?
$25
Since the end of World War II, stocks have returned on average close to 10 percent a year.
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.
The record date is the date that the actual dividend payment is made to stockholders.
A stock split is a procedure in which a stockholder's common stock is exchanged for preferred stock.
Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.
A blue-chip stock is too speculative for most investors.
A stock that pays higher than average dividends is called an income stock.
A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.
A defensive stock is a stock that typically sells for less than $1.
A large cap stock is a stock issued by a corporation that has capitalization of more than $10 billion.
Because of the need for secrecy, most corporations do not supply financial information about their company on their websites.
By using the internet, it is possible to find market price quotations, but more detailed financial information about a corporation is unavailable to the average investor.
It is common for stock advisory services like Morningstar, Standard & Poor's, and Value Line to charge fees for their more detailed financial information.
If a corporation's earnings decline, the stock's price usually increases.
An increase in a corporation's earnings per share is a healthy sign.
Stocks issued by large corporations in mature industries often have high P-E ratios.
No meaningful average for the earnings per share measure exists.
The total return on a stock is equal to the current market value of the stock minus the investor's purchase price.
The annualized holding period yield calculation takes into account the time the investment is held.
The book value for a share of stock is determined by deducting all liabilities from the corporation's assets and dividing the remainder by the number of outstanding shares of common stock.
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.
The fundamental analysis theory is based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company.
An investment bank is a financial firm that assists corporations in raising funds, usually by helping to sell new security issues.
A securities exchange is a marketplace where member brokers, who represent investors, meet to buy and sell securities.
A market order is a request to buy or sell a stock at the current market value.
The minimum commission charged by most brokerage firms for buying or selling stock is between $5 and $25.
A limit order is a request to buy or sell stock at a specified price or better.
Most speculators purchase stock and hold onto it for a number of years.
Dollar cost averaging helps investors avoid the pitfall of buying high and selling low.
When investors purchase stock on margin, they borrow stock from a stockbroker or brokerage firm.
A call option gives the purchaser the right to sell 100 shares of a stock at a guaranteed price before a definite expiration date.
A low market-to-book ratio could indicate that a stock is undervalued.
Amy Farmer just received a legal form in the mail from a firm in which she owns stock. This form lists the issues to be decided at the annual stockholders' meeting and asks her to give written permission for someone else to vote for her if she cannot attend. What form has she received in the mail?
Jeff Goldblum has just purchased a security which has no maturity date and no promised payments. He can recoup his investment by either selling the security to another individual or to the issuer, if the issuer ever makes an offer to buy it. What type of security did Jeff purchase?
Christopher Pratt just bought shares of common stock. Which one of the following is he entitled to based on his ownership of these shares?
James Green just bought a security 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?
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?
Sean Rouse owns shares of common stock in Stowaway Transportation Company. The company is getting ready to pay a dividend. Sean knows he must be registered on the corporation's books on the _______ date in order to receive the dividend.
Orlando Blodgett is buying stock in the Getaway Caribbean Cruise Company today. He had thought about buying the stock yesterday and if he had, he would have received this quarter's dividend. However, since he waited until today, he will not receive that dividend payment. Given this information, which one of the following dates applies to this stock today?
Beverly Frickel purchased 100 shares of Gleason Systems stock for $42.50 per share. Her commission for this purchase was $35. She sold the stock two years later for $55 per share and a commission of $50. What was Beverly's total dollar return on this stock?
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?
Lindsey Holt owns stock in the Galloway Gems Company. She knows in advance that the dividend on this stock is a $1.50 per share.. Given this, you know for sure that she purchased which type of stock?
When compared to corporate bonds, the dividend yield on preferred stocks is often _____the yield on bonds.
The federal government requires corporations selling new issues of securities to disclose information about itself in a prospectus. Which of the following must be disclosed?
To finance their business activities, many corporations prefer selling common stock because:
Common stock dividends are paid out of profits and:
Equity financing is a preferred choice to provide financing for a corporation because:
ABC Corporation holds its annual meeting in April. Maxine Star, who owns stock in the company, cannot attend the meeting. She can vote by:
Dividends remain with the stock until:
Patsy Banz owns 220 shares of a stock. For the last calendar quarter, the company paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?
Jo Bower purchased 150 shares of stock for $24 a share and sold it for $30 a share. The commissions required to buy and sell her stock totaled $60 for each transaction. Assuming she received no dividends during the time she owned the stock, what is her total investment on the purchase of this stock?
James Brewer purchased 100 shares of stock for $72 a share. James also paid a $55 commission. What was the total purchase price for this transaction?
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.
When a stock splits two-for-one, you should expect the price per share to:
Regarding a stock split, the earnings "pie" before the split is ____size after the split.
The most common stock splits include:
A very safe investment that generally attracts conservative investors is called a ____________ stock.
A stock issued by a company that has a market capitalization of between $300 million and $2 billion is called a ____________ stock.
Regardless of a stock’s classification, a stock is a _____investment because there are no guarantees.
A stock issued by a corporation that has a market capitalization of between $2 and $10 billion is called a ____________ stock.
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 ____________ stock.
A stock that sells for $1 or less per share is called a _____ stock.
By using the Yahoo! Finance website, an investor can find all of the following information on a stock except its:
The federal government requires that a corporation selling a new issue of securities must disclose information about the company and its finances in a:
Anthony Edwards wants to diversify his portfolio by adding a stock that maintains stable earnings when the economy declines. What type of stock does Anthony want to add to his portfolio?
George Clancy wants to diversify his portfolio by adding a stock that has a value which moves in direct relation to the business cycle. What type of stock is George thinking about adding to his portfolio?
Sean Barber wants to invest in a stock that is relatively safe, suitable for conservative investors, and less speculative than other stocks. What type of stock best fits Sean's requirements?
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?
Mellon Manufacturing has after-tax income of $3 million. It also has 2 million shares of stock outstanding. What is the corporation’s earnings per share?
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?
Masterworks Manufacturing has calculated its earnings per share as $2.50. If the corporation has 250,000 shares outstanding, what is the amount of after-tax income?
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?
Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of its common stock. The stock currently sells for $85 per share. The company earned $5 million after taxes. The annual dividend is $0.50 per share. The company has assets of $125 million and liabilities of $25 million. What is the P-E ratio?
Acme Widget, Inc. has one million shares of common stock outstanding at a price per share of $85. The company earned $5 million after taxes. The annual dividend is $3.50 per share. The company has assets of $125,000,000 and liabilities of $25,000,000. What is the dividend yield rounded to nearest hundredth of a percent?
To calculate dividend yield, the annual dividend amount per share is divided by the _______ per share.
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 per share. What is the dividend yield rounded to the nearest tenth of a percent?
The stock of ABC Company has a dividend yield of 5%. The corporation has paid a dividend of $3.75 a share over the last 12 months and has earnings per share of $5. What is the current market price per share?
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?
Assume that you purchased 100 shares of a stock for $70 a share, that you did not receive any dividends, and that you sold your stock for $80 a share at the end of one year. What is the total return for your investment?
A yield calculation that takes into account the total return, the original investment, and the number of years that the investment is held is called ____________ yield.
Acme Widget, Inc. has 1,000 shareholders who own a total of one million shares of its common stock. The company earned $10 million after taxes and paid out $4 million in dividends. The company has assets of $125 million and liabilities of $25 million. What is the book value per share?
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?
Which of the following is true regarding book value?
ABC Corporation has assets that total $12 million and liabilities that total $4 million. It also has 500,000 shares of stock outstanding. What is the ABC's book value per share?
Quincy Martin Manufacturing stock has a market value of $48 a share. If the book value is $40 a share, the corporation’s market-to-book ratio is:
In addition to expected earnings, fundamental analysis theorists consider:
An investment theory based on the assumption that a stock's market value is determined by the forces of supply and demand in the stock market as a whole is called the ____________ theory.
An investment theory based on the assumption that stock price movements are purely random is called the ____________ theory.
The Arnold Fertilizer Company's stock is selling for $55 in the market and its earnings per share is $5. The company is projected to grow at a rate of 22% over the next year. What is this company's price/earnings to growth ratio?
Fred Manufacturing Company pays an annual dividend of $0.65 per share, has earnings per share of $2.50, and sells for $35 a share. What is this company’s dividend payout ratio?
A market in which an investor purchases financial securities from the issuer of those securities using an investment bank or other representative is called the ____________ market.
A market for existing financial securities that are currently traded among investors is called the ____________ market.
Which one of the following is a true statement regarding account executives?
Which of the following is an electronic marketplace for buying and selling global stocks and securities?
Which one of the following is a true statement?
Both limit and _____orders may be good for one day, one week, one month, good until canceled, or a specified date.
Which order is executed if and when the specified price or better is reached and all other previously received orders have been fulfilled?
An order to sell a particular stock at the next available opportunity after the market price of the stock reaches a specified price is called a ____________ order.
Jennifer Fritz is thinking about purchasing the stock of the Sunshine Corporation at the current market price. What type of order should she place?
Ashley Riley wants to buy the stock of XYZ Company at a specified price or better. What type of order should she place?
Carol Fisher wants to sell the stock of Hathaway International at the next available price after the market price reaches $50 per share. What type of order should she place?
A long-term technique used by investors who purchase an equal dollar amount of the same stock at equal intervals in time is called:
A long-term investment technique used by investors to purchase stock directly from a corporation without paying a commission to a broker is called:
Stock owners who believe the price of their stock will go down during an option period will purchase a:
On May 24, 2015, Kurt Rogers bought 100 shares of stock from XYZ Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How much will Kurt receive for this quarterly dividend?
On May 20, 2015, Tony Blackman bought 100 shares of stock from XYZ Corporation. The quarterly dividend is $1.25 per share and the record date is May 25. How much will Tony receive for this quarterly dividend?
If a stock has a 2-for-1 split:
Before a 2-for-1 stock split, Lisa's stock was valued at $50 per share. What is her per share value after the split?
After a 2-for-1 stock split:
The beta for the S&P 500 is:
If Widget Corp. has a PEG value of .50, the stock is most likely:
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.
When a corporation sells stock to the general public for the first time, it is referred to as a:
Initial public offerings are a ___________ investment.
Stock dividends are determined by the:
The stock exchange known to trade stock for innovative, forward-looking growth companies is the:
Approximately ____ percent of earnings are distributed as dividends by financially secure corporations.
A stock issued by a corporation that has a market capitalization of $300 million or less would be classified as what type of stock?
_____ is a term used to describe a situation when stocks are trading at prices above their actual worth.
A long-term investment technique that allows investors the option to reinvest cash dividends to purchase stock of the corporation is called:
If the corporation has a bad year, the board of directors generally may vote to:
A large cap stock is a stock issued by a corporation that has a capitalization in excess of how much?
Which of the following most likely does not charge a fee for you to access any of their information that may be used to evaluate a stock investment?
Beta is a measure that compares the volatility associated with a specific stock issue with the volatility of which stock index?
When choosing a brokerage firm, an investor should consider:
Many investors and analysts believe that a corporation’s ability or inability to generate _____ in the future may be one of the most significant factors that account for an increase or decrease in the value of a stock.
Earnings per share for a stock investment is calculated as:
The price-earnings ratio for a stock investment is calculated as:
The dividend yield for a stock investment is calculated by dividing:
When completing stock transactions, payment for stocks is generally required within _____ business days after the transaction.
Today most investors either trade _____ or telephone their account executives.
Mary Smith purchased 200 shares of Johnson electronics four years ago at $30.00 each. She paid a $30 commission on this transaction. She has decided to sell these shares at $50.00 each and will incur a $25 commission on this sale. What is the amount of her capital gain?
Mary Smith purchased 200 shares of Johnson electronics four years ago at $30.00 each. She paid a $30 commission on this transaction. She has decided to sell these shares at $50.00 each and will incur a $25 commission on this sale. What is the total investment amount?
A corporate bond is a corporation's written pledge that it will repay a specified amount of money with interest.
Maturity dates for corporate bonds generally range from 5 to 10 years.
The bond debenture is a legal document that details all of the conditions relating to a bond issue.
Bond interest payments are a tax-deductible business expense.
Corporate bonds are a form of equity financing that does not have to be repaid.
A mortgage bond is a corporate bond that is secured by various assets of the issuing firm.
A subordinated debenture is a more secure investment than a mortgage bond.
A convertible bond is a bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's common stock.
In reality, there is no guarantee that convertible bondholders will convert to common stock even if the price of the common stock does increase.
A sinking fund is a fund to which deposits are made each year for the purpose of redeeming a bond issue.
A registered bond is a bond whose ownership is listed in the owner's name by the issuing company.
Interest checks for registered bonds are generally mailed directly to the bondholder of record.
With the use of technology and computers, the book entry form of bond ownership is no longer used.
Although unpopular a few years back, more and more U.S. corporations are issuing bearer bonds.
Professional management spells safety, because an occasional loss incurred with one bond issue is usually offset by gains from other bond issues in the fund’s portfolio.
Many financial experts recommend bond funds for very large investors, because these investments offer diversification and professional management.
The only way an investor can make money on a bond investment is to hold the bond until maturity.
Because bonds are considered debt financing that must be repaid at maturity, the corporation's financial stability has little effect on the bond's value between the issue date and the maturity date.
Treasury bills are issued in minimum units of $10,000 with maturities that range from 10 to 30 years.
Treasury notes are issued in $100 units with a maturity of more than 1 year but not more than 10 years.
Treasury bonds are issued in $5,000 units with 10-year maturities.
A general obligation bond is a bond that is repaid from the income generated by the project it is designed to finance.
Insured municipal bonds offer slightly lower interest rates than uninsured bonds because of the reduced risk of default.
In addition to the stocks issued by the Treasury Department, debt securities are issued by federal agencies, including Fannie Mae, Ginnie Mae, and Freddie Mac.
Although there is a great deal of information on the internet about stock investments, it is impossible to evaluate bonds using the internet.
For government bonds, the bid price is the maximum price that a buyer is willing to pay for a government security.
For both Moody's and Standard & Poor's, the first two categories (high-grade and medium-grade) represent investment-grade securities.
The current yield for a corporate bond is determined by dividing the annual income amount by the current market value.
The yield to maturity takes into account the relationship among a bond's maturity value, the time to maturity, the current price, and the dollar amount of interest.
Since 1990, bond yields for high-quality corporate bonds have increased significantly.
Assume that you purchase a $1,000 corporate bond that pays 9.25 percent interest. What is the amount of interest that you receive each year?
You own a $1,000 bond that pays 9.25 percent interest. What is the amount of interest you will receive each six months?
Usually, interest on corporate bonds is paid to the bondholder every:
Nancy Groom owns a $1,000 corporate bond that pays 8.5 percent. What is the amount of each semiannual interest payment?
The legal conditions for a corporate bond are described in the:
The financially independent firm that acts as the bondholders' representative is the:
Which one of the following statements is correct?
A bond that is backed only by the reputation of the issuing corporation is called a ____________ bond.
Because of the added security of collateral, the interest rates on _____bonds are usually lower than interest rates on unsecured bonds.
A type of bond that is unsecured and gives bondholders a claim secondary to that of other designated bondholders with respect to interest payments, repayment, and assets is called a:
A legal debt convertible to shares of common stock at the investor’s option is called a ____________.
Sandra Peterson has been thinking about investing in corporate bonds. She is concerned about safety and wants the most secure bond investment possible. She would most likely invest in ____________ bonds.
A $l,000 corporate bond is convertible to 25 shares of the corporation's common stock. What is the minimum price that the stock must obtain before bondholders would consider converting the bond to stock?
A call feature:
A provision in the bond indenture that forces the corporation to make arrangements for bond repayment before the maturity date is called a ____________ fund.
To ensure that it has sufficient funds available to redeem a bond issue, a corporation may issue ____________ bonds.
XYZ Corporation wants to retire a $60 million bond issue before the maturity date. In order to call the bonds in this issue, the corporation must pay the bondholders the face value plus a premium. What is the typical premium for bonds that have been called?
Which of the following is the process of spreading your money among several different types of investments to lessen risk.
Today, almost all bond ownership records are maintained using a process called:
To calculate the current yield for a T-bill:
Which type of bond is not registered in the investor's name?
If overall interest rates in the economy rise, a corporate bond with a fixed interest rate will generally:
If overall interest rates in the economy fall, a corporate bond with a fixed interest rate will generally:
What is the approximate market value of a $1,000 corporate bond that pays 8 percent interest when comparable bonds are paying 9 percent interest?
If the approximate market value for of a $1,000 corporate bond is $1,125 and it pays 9 percent interest, then what are comparable bonds paying?
Investors purchase corporate bonds to make money through:
When investors purchase bonds that mature at regular intervals in order to balance risk and return, they are creating a:
Which type of bond would provide a high degree of price stability, because the bonds are not very sensitive to changing interest rates?
If comparable bonds are paying 8 percent and the approximate market value of a $1,000 bond is $750, then what is the annual interest on the bond?
If comparable bonds are paying 7 percent and the approximate market value of a $1,000 bond is $1,286, then what is the semiannual interest on the bond?
The commissions for purchasing bonds:
A government security issued in minimum units of $100 with maturities that are one year or less is called a:
Which of the following can be purchased through Treasury Direct at www.treasurydirect.gov ?
A government security issued in minimum units of $100 with a 30-year maturity is called a:
Dave Johnson's objective was to purchase a government bond that provided some protection against inflation as measured by the consumer price index. To fulfill this objective, John purchased a:
A bond backed by the full faith, credit, and unlimited taxing power of the state or local government that issued it is called a ____________ bond.
A bond that is repaid from the income generated by the project it is designed to finance is called a:
You are a taxpayer in the 28 percent tax bracket and you own a tax-exempt bond that pays 5 percent. What is your taxable equivalent yield?
June Tavia is trying to calculate the taxable equivalent yield for a municipal bond. If the bond she owns pays 4.5 percent interest and she is in the 25 percent tax bracket, what is the taxable-equivalent yield?
If a bond is quoted in the newspaper at 92, the current price of a $1,000 face value bond is:
If a bond is quoted in the newspaper at 105, the current price of a $1,000 face value bond is:
The minimum price at which a seller is willing to receive for a government security is known as the ____________ price.
Which of the following sources can be used by an investor to obtain a corporation's annual report?
The highest bond rating issued by Standard & Poor's is:
The highest bond rating issued by Moody's is:
A corporate bond rated B by Moody's would be suitable for:
Which bond rating does Standard & Poor's assign to a bond that is in default?
Generally, U.S. government securities issued by the Treasury Department:
According to Moody's, bonds with extremely poor prospects for recovery of principal or interest are rated:
What is the current yield for a $1,000 corporate bond that pays 7 percent and has a current market value of $800?
If the current yield for a $1,000 corporate bond is 7.9 percent and it has a current market value of $950, then what is the annual income generated by the investment?
The current yield on a corporate bond takes into account:
If a bond is purchased at a price above the face value, the yield to maturity is:
If a bond is purchased at a price below the face value, the yield to maturity is:
Dave Harris has just purchased a bond with a face value of $1,000 that pays 6 percent. The purchase price of the bond was $900, and the bond will mature in 5 years. What is the yield to maturity for this bond?
Dave Harris purchased a single bond last year for $987. He knows he will receive $1,000 on March 1, 2026. This date is referred to as the ____ date.
Which of the following are owned by a company and can be used to secure a mortgage bond?
Why do corporations sell bonds?
Tom McCallister buys a bond that the company can retire before maturity if they wish. What type of bond has Tom purchased?
Frank Riley just purchased a bond that is unsecured and is secondary to other unsecured bonds should the issuer default on interest payments or repayment at maturity. What type of bond has Frank purchased?
Dick Dowen just bought a bond that is only secured by the reputation of the issuer. What type of bond has Dick purchased?
Doug Emery purchased a bond that can be exchanged for a set number of shares of the issuer's common stock. What type of bond has Doug purchased?
Which of the following bonds would have the lowest interest rate? All of the bonds have 10 years to maturity.
Which one of the following bonds is most likely to have the highest interest rate? All of the bonds mature in 10 years.
Which is true of convertible bonds?
To calculate the taxable equivalent yield on a municipal bond:
What is bond laddering?
Which one of the following bonds would likely have the lowest risk?
Treasury bills:
Which one of the following is issued by state and local governments?
Which one of the following represents a bond that generally lacks characteristics of a safe investment and is subject to high credit risk?
An issue of serial bonds:
Which of the following terms applies to a bond issue for which the issuer puts money aside at regular intervals for the purpose of redeeming the bonds?
Scott Turner has a bond with 10 years to maturity, a face value of $1,000, annual interest of $80, and a market price of $800. What is the yield-to-maturity on this bond?
Elizabeth Cherry has a bond that has 10 years to maturity, a face value of $1,000, an 8% interest rate, and a market price of $1,200. What is the dollar amount of annual interest on this bond?
Which of the following can cause the price of a corporate bond to fluctuate until the maturity date?
Which of the following statements is true with respect to U.S. Treasury securities?
The quality rating given by Standard & Poor's to highly speculative bonds is:
If the terms of the sinking fund provision are not met, the _____ may take legal action against the company on behalf of the bondholders.
The ______ is the dollar amount the bondholder will receive at the bond’s maturity.
Which of the following factors is used to calculate the total return on the sale of a bond?
For 2015, bond yields for high-quality corporate bonds have been approximately how much?
Which of the following statements is not true about Treasury Inflation-Protected Securities?
Maturity dates for intermediate term corporate bonds generally range from 3 to ___ years.
For Moody's and Standard & Poor's, the first _____ bond-rating categories represent investments suitable for conservative investors who want a safe investment that provides a predictable source of income.
For government bonds, the difference between the bid price and the ask price is called the:
In the U.S., bond price quotations are based on the price of a bond with no accrued or earned interest, which is called the:
In the U.S., the _____ for a bond represents the price of the bond plus accrued interest earned since the last interest payment date.
A type of bond that is still issued by corporations in foreign countries, but is no longer issued by U.S. corporations is called a:
Which of the following is a fund to which annual or semiannual deposits are made for the purpose of redeeming a bond issue?
_____are bonds of a single issue that mature on different dates.
Corporate bonds that pay higher interest but also have a higher risk of default are called:
Interest rates on high-yield (junk) bonds are _____ percentage points higher than safer bond issues.
High-yield (junk) bonds are sold by companies:
With a _____, only the registered owner can collect the principal at maturity, but interest payments can be paid to anyone who presents one of the detachable coupons.
Anyone who is in physical possession of a _____ can collect interest payments and the face value of the bond at maturity regardless of whether or not they are the rightful owner.
The Treasury Department currently sells T-bills with _____maturities.
When a treasury bill matures, the investor receives:
In late 2014, there were over 11,000 mutual funds.
The major reasons why investors purchase mutual funds are professional management and diversification.
Because of professional management, there is no need for the individual investor to evaluate a mutual fund investment.
Today, there are more closed-end funds than there are open-end funds.
Investors in an open-end fund are free to buy and sell shares at the net asset value.
There are more exchange-traded funds than there are open-end mutual funds.
The potential return on any investment should be indirectly related to the risk the investor assumes.
A load fund is a mutual fund in which investors pay a commission either when they purchase or when they redeem shares.
If you need your money in a short period of time, you should consider conservative investments with less risk.
You should consider your tolerance for risk before investing in mutual funds.
For a mutual fund, the annual management fee is a fixed percentage of the fund’s total liabilities.
Mutual funds have been around for a long time and became popular in the U.S. before the Great Depression in 1929.
Investors less than 35 years old are less likely to invest in mutual funds than any other age group.
When you invest in Class A shares, you pay a sales commission when you sell your mutual fund shares.
Class C shares, with their ongoing higher 12b-1 fees, may be more expensive than Class A or Class B shares over a long period of time.
All information related to management fees, contingent deferred sales fees, 12b-1 fees, and other expenses are contained in a mutual fund's prospectus
Mutual funds that allocate their investments among common stocks and bonds are referred to as small-cap funds.
Mutual funds that invest in smaller, lesser-known companies that offer higher growth potential are referred to as sector funds.
High-yield bond funds are sometimes referred to as junk-bond funds.
A mutual fund that provides tax-free interest income is referred to as a long-term U.S. bond fund.
Asset allocation funds invest in various asset classes including stocks, bonds, fixed-income securities, and money market instruments.
The family of funds concept makes it convenient for shareholders to switch their investments among funds as different funds offer more potential.
The fund manager is ultimately responsible for a fund's success, because he/she decides when to buy or sell securities in the fund.
Because an index mutual fund is a mirror image of a specific index, the dollar value of a share in an index fund increases when the index increases.
An investment company sponsoring a mutual fund must give existing shareholders a prospectus.
While advisory services provide detailed information on common and preferred stocks, there are no advisory services that provide information on mutual funds.
Investors in closed-end funds, exchange-traded funds, and open-end funds can make money by purchasing shares at a low price and then selling them at a higher price.
Although mutual funds are popular among individual investors, most people do not use them as part of an IRA or retirement account.
Typically, you must invest at least $15,000 to open a mutual fund account.
Income dividends are the earnings a fund pays to shareholders from its dividend and interest income.
Capital gain distributions result when you decide to sell shares in a mutual fund at a price higher than you paid.
While mutual fund income dividends are subject to taxation, capital gain distributions are not subject to taxation.
Tax information for mutual funds is reported as part of the year-end statement and on an IRS Form 1099-DIV.
To purchase shares in an open-end mutual fund from an investment company, you may use four options: regular account transactions, voluntary savings plans, contractual savings plans, and reinvestment plans.
When you decide to redeem shares in an open-end mutual fund, the only option is to sell off a specific number of shares.
Over many years, the majority of managed mutual funds outperform the Standard & Poor's 500 stock index.
There are about _____ exchange-traded funds.
Approximately ____________ percent of all mutual funds are open-end funds.
A mutual fund in which shares are issued only when the fund is organized is called a ____________ fund.
A mutual fund whose shares are issued and redeemed by the investment company at the request of investors is called a ____________ fund.
The value of a mutual fund's portfolio minus the mutual fund's liabilities, equals a figure that when divided by the number of shares outstanding, gives you the:
The Capitalist Mutual Fund's portfolio is valued at $45 million. The fund has liabilities of $3 million, and the investment company sponsoring the fund has issued 1,600,000 shares. What is the fund's net asset value?
The All-Star Basic Value Fund's portfolio is valued at $210 million. The fund has liabilities of $5 million, and the fund’s net asset value is $12.50. What is the fund's number of shares outstanding?
For most mutual funds, the net asset value is calculated:
The New American Enterprise Mutual Fund's portfolio is valued at $120 million. The fund has liabilities of $4 million, and the investment company sponsoring the fund has issued 5,800,000 shares. What is the fund's net asset value?
A mutual fund in which investors pay a commission every time they purchase shares is called a ____________ fund.
The sales charge for purchasing fund shares that impose an up-front commission is____________ percent of the purchase price.
When an investor purchases shares in a load fund, the average charge is usually between ____________ percent.
Mary Cooper just purchased 100 shares in the All-American Fund. The purchase cost for each share was $20. If this fund charges a 5 percent load, what is the total amount of commission she will pay the investment company?
Bob Newsome purchased 250 shares of the Northern Lights Growth Fund. The purchase cost was $30 per share and the total commission was $225. What is the load being charged by the fund?
A mutual fund in which no sales charge is paid by the individual investor is called a ____________ fund.
The typical management fee for mutual funds ranges between ______ percent.
The average management fee for all mutual funds is:
A fee that investors pay when they withdraw their investment from a mutual fund is called a:
When Pete Mills went to withdraw $5,000 from the Nationwide Fidelity Mutual fund, he was informed that the fund would charge 5 percent of the amount withdrawn. What is the dollar amount of the withdrawal charge?
A fee that some investment companies charge for distributing and marketing a mutual fund is called a:
Another name for a mutual fund that charges a contingent deferred sales load is a ____________ fund.
Another name for a mutual fund that doesn't charge a sales load or a contingent deferred sales fee, but does charge an ongoing higher 12b-1 fee is a class ____________ fund.
Together, all the different management fees, 12b-1 fees, and additional operating costs for a specific fund are referred to as a(n):
Many financial planners recommend that investors choose a mutual fund with an expense ratio that is:
A mutual fund that invests in common stocks and bonds with the primary objectives of conserving principal, providing income, and long-term growth is called a ____________ fund.
A mutual fund that invests in corporations expecting higher-than-average revenue and earnings growth is called a ____________ fund.
A mutual fund that invests in stocks issued by companies with a long history of paying dividends is called a ____________ fund.
A mutual fund that invests in investment-grade corporate debt with maturities between 3 and 10 years is called a ____________ fund.
A mutual fund that invests in companies within the same industry is called a ____________ fund.
A mutual fund that only invests in companies outside the United States is called a ____________ fund.
A municipal bond fund:
Last month Nellie Jacobson's divorce became final. As part of the settlement, she received $150,000. She would like to invest in mutual funds, but since she is 62 years old, she is concerned with the safety of her "nest egg." Which of the following mutual funds would you recommend?
Martin Campbell wants to invest in mutual funds, but is also worried about diversification. Which fund would you recommend to him?
When one investment company manages a group of mutual funds, it is called a:
Henrietta Marston plans to retire in the year 2050. She is considering a fund that will be more risk-oriented now and become increasingly conservative as she approaches retirement. Which of the following funds would you recommend to her?
Which one of the following funds would be considered the safest investment?
The typical expense ratio for an index fund is:
Which one of the following statements is false regarding mutual funds and the Internet?
An investment company sponsoring a mutual fund must give potential investors a:
Many investors will access a fund’s_____ by using the Internet. It includes a letter from the fund’s independent auditors that provides an opinion as to the accuracy of the fund’s financial statements.
Which one of the following publications does not provide readers with information about mutual funds and investing?
During 2008, Lincoln Masters received income dividends of $850 and capital gain distributions of $540. Based on this information:
Income dividends and capital gain distributions are:
The most popular and least complicated method of purchasing shares in an open-end mutual fund is through a:
A mutual fund that requires investors to make regular purchases over a specified period of time is called a:
Because of front-end commission charges, many financial experts and government agencies are critical of:
If an investor uses a reinvestment plan to invest income dividends and capital-gain distributions:
Which one of the following is not a withdrawal option for a mutual fund?
Which of the following is an advantage of an exchange traded fund?
Tiffany Scott puts $10,000 into a load mutual fund. She knows that her up-front sales commission is 6%. How much of her money actually goes to buy shares in the mutual fund?
Joseph Carter is buying shares in a mutual fund that is investing in stocks all over the world, including the United States. What type of mutual fund is this?
Conrad Maestro is buying shares in a mutual fund that seeks rapid price appreciation by purchasing stocks whose prices are expected to increase dramatically in a short period of time. What type of mutual fund is he purchasing?
Phyllis Payne is buying shares in a mutual fund that invests in companies with a long history of paying a dividend whose objective is to provide income to shareholders. What type of mutual fund is she buying?
Norma Rose is buying shares in a mutual fund that invests in foreign stocks sold in securities markets throughout the world, excluding the United States. What type of mutual is she buying?
Noelle Simon is buying shares in a mutual fund that only invests in companies located in the Latin America area. What type of mutual fund is this?
Tisha Elmwood is buying shares in a mutual fund that avoids companies that do harm to people, animals, and the environment. What type of mutual fund is this?
Christopher Fishbone is buying shares in a mutual fund that invests in companies that are all in the natural resources industry. What type of mutual fund is he buying?
Sloan Richards is buying shares in a mutual fund that invests in companies with a total capitalization of less than $1 billion. What type of mutual fund is this?
Nathan Fuller is buying shares in a mutual fund that invests in the same companies as those found in the Standard & Poor’s 500. What type of mutual fund is he buying?
Louise Prescott is buying shares in a mutual fund that invests in larger, well-established companies that are expecting higher-than-average revenues and earnings growth. What type of mutual fund is she buying?
Which type of mutual fund invests in high-yield, high-risk corporate bonds?
Which type of mutual fund invests in corporate bonds with maturities in excess of 10 years?
Which of the following invests in U. S. Treasury securities?
Marcie is seeking interest income but wants to ensure that her investment is as safe as possible. Which type of mutual fund best fits her requirements?
Caroline Campbell is buying shares in a mutual fund that invests in bonds offered by foreign companies and governments. What type of mutual fund is she buying?
Which of the following would be found in a mutual fund's prospectus?
Which of the following is a disadvantage associated with purchasing a mutual fund?
Which of the following is an advantage associated with purchasing a mutual fund?
Sharon Taylor uses all of her dividend income and capital gain distributions to purchase additional shares in her mutual fund. Which one of the following plans is she using?
Will Hopkins is getting ready to purchase shares in a mutual fund. He will have to pay an upfront sales commission to purchase these shares. What type of shares is he buying?
Melanie Davis is getting ready to purchase shares in a mutual fund. The fund will charge her a sales charge only if she redeems her shares within a stated period of time. What type of shares is she buying?
Which one of the following is true with respect to closed-end funds?
Which of the following options can a mutual fund investor use to purchase shares in an open-end fund?
The Capitalist Mutual Fund's net asset value is $26.25. The fund has liabilities of $3 million and 1,600,000 shares have been issued. What is the value of the fund's portfolio?
$45 million
The turnover ratio of a mutual fund measures the:
A mutual fund:
A closed end-fund is:
Contingent deferred sales loads may also be referred to as ____ loads.
Contingent deferred sales loads generally:
Exchange-traded funds make-up about what percent of all mutual funds?
What is the most common reason given by American mutual fund owners for investing in funds?
Another name for lifecycle funds is:
What percent of mutual funds receive a 5-star rating from Morningstar?
Which of the following is an example of an exchange-traded fund (commonly referred to as ETF) that is available to track an index?
Most open-end funds provide their investors with which service?
A contingent deferred sales load, which is a charge that shareholders pay when they withdraw their investment from a mutual fund, can be as low as 1 percent or as high as ___ depending on how long you own the mutual fund before making a withdrawal.
All of the following information is contained in a mutual fund's fee table, except:
Which of the following seeks high total return by maintaining precise amounts within each of the various types of asset that the fund invests in?
A(n) _____ fund is a fund that generally invests in the stocks or other securities contained in a specific stock or securities index.
Who owns the most mutual funds?
Today many investors use which of the following to create a financial plan to generate the income needed to satisfy their long-term goals?
Why do Americans invest in mutual funds?
Within a family of funds, charges for exchanges generally are small for each transaction, and the fee may be as low as _____ per transaction.
Which of the following states that it is impossible to consistently beat the market without raising your risk level?
Morningstar rates mutual funds from the lowest to the highest using _____stars.
Which of the following companies manages assets of $3 trillion and has always been known as the leader in low-cost investing and has over 300 different funds?
If the dollar amount of total return on your mutual fund is $195 and the original cost of your investment is $1,400, then what is your percentage of total return?
