(TCO 5) Which of the following statements is false?
No one is going to make you save the money;
you need to start a program.
To be useful, investment objectives must be
very specific.
Investment goals can be different for each
individual.
Because investment objectives deal with the
future, it is useful to plan more than 5 years in the future.
A long-term investment objective involves a
time period of 2 years or less.
Question 2. Question
:
(TCO 5) If an investment objective is considered to be long
term, then this means the goal should be achieved in what time frame?
Less than 2 years
In 2–5 years
More than 5 years
Less than 1 year
None of the above
: Chapter
13, page 424
Question 3. Question
:
(TCO 5) You currently hold a $1,000 corporate bond; however,
if interest rates in the overall economy decrease, which of the following is
most likely to be the market value of this bond?
The bond is worthless.
$1,000
$900
$1,100
It is impossible to determine whether the
bond’s value will increase or decrease.
Question 4. Question
:
(TCO 5) Gina has recently become a widow with two small
children, and wants to make sure that both she and the children are taken care
of in the future. She received a check for $350,000 from a life insurance
company. Based on this information, Gina places a high degree of importance on
beta.
safety.
business failure.
market risk.
liquidity.
: Chapter
13, page 431
safety.
Question 5. Question
:
(TCO 5) Which of the following statements is false?
When choosing an investment, it is necessary
to consider the risk factor.
During inflationary times, there is a risk
that the financial return on an investment will not keep pace with the rate of
inflation.
The interest rate risk associated with
investments in bonds is the result of changes in business conditions faced by
companies.
The risk of business failure deals with
changes in the value of stocks and bonds due to changes and risks within a
business itself.
The prices of stocks, bonds, and other
investments fluctuate in the market.
: Chapter
13, page 433
The interest rate risk associated with investments in bonds
is the result of changes in business conditions faced by companies.
Question 6. Question
:
(TCO 5) A $1,000 corporate bond pays 7.5% a year. What is
the annual interest you will receive?
$1,075
$7.50
$0.75
$75.00
$0
: Chapter
13, page 433
Question 7. Question
:
(TCO 5) Investments can be affected by all of the following
risks except
inflation.
global risks.
individual selection.
business failure.
market risks.
: Chapter
13, pages 433-435
Question 8. Question
:
(TCO 5) John Farmer recently received a legal form from the
company where he owns stocks that list the issues to be decided at the annual
stockholders’ meeting. The item asks that he signs something that allows
someone else to vote for him. What has he received?
Equity
Proxy
Voting rights
Dividends
None of the above
: Chapter
14, page 462
Question 9. Question
:
(TCO 5) James Green just bought company stock that will
provide him with a quarterly cash payment. What is this quarterly payment
called?
Equity
Dividends
Voting rights
Interest
None of the above
: Chapter
14, page 461
Question 10. Question
:
(TCO 5) Beverly Frickel purchased 100 shares of Gleason
Systems stock for $32.50 per share. Her commission for this purchase was $25.
She sold the stock 2 years later for $45 per share and a commission of $40.
While she held the stock it paid a dividend of $1.50 per share. What was
Beverly’s total dollar return on this stock?
$1,355
$1,335
$65
$1,375
$1,400
Question 11. Question
:
(TCO 5) Bill Affleck is interested in buying preferred
stock, but to be protected if the company needs to omit a dividend payment. He
wants any unpaid dividends to accumulate and be paid before any common stock
dividends are paid. Which one of these features of preferred stock is Bill
seeking?
Convertible
Callable
Cumulative
Credible
None of the above
: Chapter
14, page 467
Question 12. Question
:
(TCO 5) Dividends must be approved by a firm’s board of
directors, and
dividend payments are paid out of profits.
dividends are guaranteed.
dividends are paid before a firm’s taxes are
paid.
dividends are usually paid twice a year.
dividends can be paid forever.
: Chapter
14, page 462
Question 13. Question
:
(TCO 5) All of the statements below are false except
corporations are required by law to report all
activities to their stockholders each month.
stockholders may vote only by proxy.
stockholders must approve the sale of all
goods and services by the company.
corporations are required by law to have two
stockholder meetings each year.
stockholders must approve major changes to
corporate policies.
: Chapter
14, page 462
stockholders must approve major changes to corporate
policies.
Question 14. Question
:
(TCO 5) Assume that you purchased a $1,000 Exxon bond that
pays 8.5% interest. What is the amount of interest you would receive every 6
months?
$42.50
$8.50
$85
$4.25
$1,000
:
Question 15. Question
:
(TCO 5) What is the approximate market value for a $1,000
corporate bond that pays 7% interest when comparable bonds are paying 8%
interest?
$800
$875
$70
$1,142
$1,000
Question 16. Question
:
(TCO 5) Which of the statements below is false?
Stock is a form of equity capital.
Stock does not have a maturity date.
Bonds are a form of debt capital.
Bonds do not have to be repaid at maturity.
Interest payments are made to bondholders.
:
Question 17. Question
:
(TCO 5) A _____ bond is unsecured and gives bondholders a
claim secondary to that of other designated bondholders with respect to both
income and assets.
subordinated debenture
mortgage
debenture
preemptive
Treasury
:
Question 18. Question
:
(TCO 5) You have been thinking about investing in corporate
bonds, but are seeking the most secure bond investment possible. Most likely,
you would want to select _____ bonds.
debenture
subordinated
indenture
convertible
mortgage
mortgage
Question 19. Question
:
(TCO 5) If a corporation is allowed to buy outstanding bonds
from current bondholders before the maturity date, this is referred to as
a flexible bond.
a convertible option.
a call feature.
a free purchase.
a guarantee.
:
Question 20. Question
:
(TCO 5) A _____ bond is registered in the owner’s name by
the issuing company.
certified
coupon
general obligation
zero-coupon
registered
:
