Question 1

Describe the difference between full-service, discount, and on-line brokerage firms.

Accepted Answer

Full-service brokerage firms offer a wid...

Question 2

Gaby Williams is thinking about buying some stock but wants some protection should the issuer miss paying a dividend payment. Which one of the following features would help provide this protection?

Accepted Answer

A)   Convertible
B)   Callable
C)   Cumulative
D)   Cancellable
E)   CommonF) B) and C)
G) A) and D)

Question 3

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?

Accepted Answer

A)   Option premium
B)   Interest
C)   Capital gain
D)   Dividend
E)   RebateF) A) and C)
G) B) and C)

Question 4

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 (PEG)  ratio?

Accepted Answer

A)   11.00
B)   9.09
C)   0.50
D)   50.00
E)   22.73F) All of the above
G) A) and E)

Question 5

The annualized holding period yield calculation takes into account the time the investment is held.

Accepted Answer

A) True 
 B)False

Question 6

An increase in a corporation's earnings per share is a healthy sign.

Accepted Answer

A) True 
 B)False

Question 7

Ashley Riley wants to buy the stock of XYZ Company at a specified 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) A) and D)
G) A) and B)

Question 8

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 $120. Assuming she received no dividends during the time she owned the stock, what is her total return on this investment?

Accepted Answer

A)   $600
B)   $780
C)   $900
D)   $2,400
E)   $3,000F) D) and E)
G) B) and E)

Question 9

To raise capital, many corporate financial managers prefer selling common stock because:

Accepted Answer

A)   it doesn't have to be repaid until 10 to 15 years after it has been issued.
B)   interest payments to stockholders are lower than interest paid to a bank.
C)   common shareholders have no voting rights.
D)   interest paid to stockholders is tax deductible.
E)   the money obtained from stockholders does not have to be repaid.F) C) and D)
G) A) and C)

Question 10

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?

Accepted Answer

A)   Midcap stock
B)   Cyclical stock
C)   Small-cap stock
D)   Blue-chip stock
E)   Growth stockF) A) and E)
G) A) and B)

Question 11

Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.

Accepted Answer

A) True 
 B)False

Question 12

Dollar cost averaging helps investors avoid the problem of buying high and selling low.

Accepted Answer

A) True 
 B)False

Question 13

Masterworks Manufacturing has after-tax profits that total $625,000. If the firm has 250,000 shares, what is the amount of earnings per share?

Accepted Answer

A)   $0.40
B)   $1.00
C)   $2.00
D)   $2.50
E)   $4.00F) B) and E)
G) C) and D)

Question 14

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 firm has assets of $125 million and liabilities of $25 million. What is the book value per share?

Accepted Answer

A)   $4
B)   $125
C)   $10
D)   $100
E)   $25F) None of the above
G) B) and E)

Question 15

Ms. Hart's stock club uses numerous charts that plot past price movements and other stock ratios. Her club relies on _______ analysis to determine stock selections.

Accepted Answer

A)   fundamental
B)   technical
C)   efficient market
D)   chart
E)   plotF) A) and B)
G) D) and E)

Question 16

To calculate dividend yield, the annual dividend amount per share is divided by the _______ per share.

Accepted Answer

A)   current stock price
B)   stock's original issue value
C)   current earnings
D)   current book value
E)   current salesF) B) and E)
G) C) and D)

Question 17

Explain what dollar cost averaging is and why an investor would use the technique.

Accepted Answer

The answer of Explain what dollar cost averaging is and...

Question 18

A low market-to-book ratio (less than 1) could indicate that a stock is undervalued.

Accepted Answer

A) True 
 B)False

Question 19

Which one of the following is a true statement?

Accepted Answer

A)   When choosing a stock advisory service that charges fees for their investment advice, the quality of the information is always excellent.
B)   Mergent's Investors Service only provides information about bonds.
C)   Value Line provides information about bonds and mutual funds, but not common stocks.
D)   The information provided by investors' services consists of simple alphabetical listings only.
E)   Online computer services may be used to research companies and to obtain current stock prices.F) A) and D)
G) C) and D)

Question 20

By using the Yahoo! Finance website, an investor can find all of the following information on a stock except its:

Accepted Answer

A)   historical prices.
B)   stock symbol.
C)   current market value.
D)   most recent dividend.
E)   actual rate of return for the next year.F) A) and D)
G) None of the above

Exam 14: Investing in Stocks

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 (PEG) ratio?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

To calculate dividend yield, the annual dividend amount per share is divided by the _______ per share.

Correct AnswerverifiedShow Answer

Explain what dollar cost averaging is and why an investor would use the technique.

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

By using the Yahoo! Finance website, an investor can find all of the following information on a stock except its:

Correct AnswerverifiedShow Answer

The annualized holding period yield calculation takes into account the time the investment is held.

Correct AnswerverifiedShow Answer

Describe the difference between full-service, discount, and on-line brokerage firms.

Correct AnswerAnswered by ExamLex AIFull-service brokerage firms offer a wid...View AnswerShow Answer

Ashley Riley wants to buy the stock of XYZ Company at a specified price. What type of order should she place?

Correct AnswerverifiedShow Answer

An increase in a corporation's earnings per share is a healthy sign.

Correct AnswerverifiedShow Answer

Which one of the following is a true statement?

Correct AnswerverifiedShow Answer

To raise capital, many corporate financial managers prefer selling common stock because:

Correct AnswerverifiedShow Answer

Dollar cost averaging helps investors avoid the problem of buying high and selling low.

Correct AnswerverifiedShow Answer

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 $120. Assuming she received no dividends during the time she owned the stock, what is her total return on this investment?

Correct AnswerverifiedShow Answer

Masterworks Manufacturing has after-tax profits that total $625,000. If the firm has 250,000 shares, what is the amount of earnings per share?

Correct AnswerverifiedShow Answer

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 firm has assets of $125 million and liabilities of $25 million. What is the book value per share?

Correct AnswerverifiedShow Answer

Ms. Hart's stock club uses numerous charts that plot past price movements and other stock ratios. Her club relies on _______ analysis to determine stock selections.

Correct AnswerverifiedShow Answer

Preferred stock is often referred to as a middle investment as it has features similar to both common stock and corporate bonds.

Correct AnswerverifiedShow Answer

A low market-to-book ratio (less than 1) could indicate that a stock is undervalued.

Correct AnswerverifiedShow Answer

Gaby Williams is thinking about buying some stock but wants some protection should the issuer miss paying a dividend payment. Which one of the following features would help provide this protection?

Correct AnswerverifiedShow Answer

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