FCS 3450 Test 2 Spring 2010

FCS 3450 Test 2 Spring 2010

1. Financial goals should be specific and measurable? True
2. There is no difference between saving and investing? False
3. You can usually receive a higher yield on a savings account than an investment account? False
4. The biggest distinction between savings and investing is the yield (return)? True
5. Once you begin investing you can discontinue your savings plan. False
6. At maturity , corporations must repay stockholders the money they invested in the company. FALSE
7. Dividend payments on common stock are guaranteed, but the amount is determined by the board of directors. False
8. Preferred stock is often referred to as a middle investment somewhere between common stock (an ownership position for the stockholder) and corporate bonds (a creditor position for the bondholder). True
9. As the risk taken by an investor goes up the return on that investment ought to go up? True
10. A defensive stock is a stock that typically sells for less than $1. False
11. 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. False
12. The major reasons why investors purchase mutual funds are professional management and diversification.True
13. Today, there are more closed-end funds than there are open-end funds. False
14. In a newspaper quotation, NAV stands for "not accessible value." False
15. 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.True
16. Pure risk means you can either make or lose money. False
17. One way to reduce the amount of risk an investor takes is to diversify. True
18. Dollar cost averaging means buying the same number of stock each time you invest. False.
19. There is no difference between diversification and allocation. False
20. Beta measures the probability that a stock will make money. False
21. A bond rating has to do with the default risk of a bond. True
22. Risk and average rate of return are positively correlated. True
23. One of the disadvantages of investing in federal government securities is they are high risk. False
24. Municipal bonds are federal tax-free. True
25. The main reason why investors choose U.S. government securities is the above average interest rates that these securities pay. False
26. CDs have no liquidity risk. False
27. There is no difference between common and preferred stocks except the risk factor. False
28. A bull market is a time when prices are rising. True
29. A bear market is a time when prices are rising. False
30. Mutual funds disadvantage is they usually are not very diversified. False
31. Open ended mutual funds are the most common. True
32. Mutual fund’s net asset value is usually calculated and posted throughout the trading day. False
33. An investment paying 7% is always a better investment than one paying 6.5%. False
34. In most cases a traditional IRA is a better investment for a student than a Roth IRA. False
35. Most IRAs restrict investors by only offering few investment options. False
36. Full retirement age is 65 years old. False
37. One of the misconceptions about retirement is that your expenses will drop when you retire. True
38. In case of a divorce, division of pension benefits generally depends on the length of the marriage. True
39. Although medical expenses vary from person to person, they tend to decrease with age. False
40. If you make a withdrawal from a 401(k) or 403(b) you must pay taxes due plus a 10% penalty. True
41. Having an estate going to probate is usually the best idea for most families. False
42. Using next year’s income this year is:
43. Saving
44. Investing
45. Borrowing
46. Stupid
47. The use of economic resources to make a profit is the definition of:
48. Saving
49. Investing
50. Diversification
51. Allocation
52. Most people invest to:
53. Achieve financial goals
54. Increase current income
55. Gain wealth and financial security
56. Have funds available for retirement
57. All of the above
58. An example of investing by lending is:
59. Owning stocks
60. Owning real estate
61. Owning bonds
62. Leveraging someone else’s money
63. An example of investing by owning is:
64. Owning stocks
65. Owning bonds
66. Leveraging someone else’s money
67. An example of investing by lending is:
68. Owning stocks
69. Owning bonds
70. Leveraging someone else’s money
71. The type of risk an investor takes of losing a major portion of or all an investment is:
72. Inflation risk
73. Default risk
74. Interest rate risk
75. Marketability risk
76. Of the following which is the safest investment:
77. CDs
78. Corporate bonds
79. Mutual funds
80. Real estate
81. Of the following which is the riskiest investment:
82. CDs
83. Money market
84. Rental property
85. Corporate bonds
86. Commodities
87. If you invest money for shares of a company what type of investment do you own?
88. Stocks
89. Bonds
90. Mutual Funds
91. Real Estate
92. CDs
93. Nancy Cammans just bought the stock of a company. She knows that she will receive a cash payment from the company once a quarter, although the company is not obligated to make this payment. What will he receive?
    A.Equity
    B.Proxy
    C.Voting Rights
    D.Dividends
    E.None of the choices
94. Cindy Scymanski 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. While she held the stock it paid a dividend of $1.50 per share. What was Beverly's total dollar return on this stock?
    A.$1,250
    B.$1,165
    C.$150
    D.$1,315
    E.$1,400

1. Loni Smithowns 220 shares of General Mills Corporation. For the last calendar quarter, General Mills Corporation paid a dividend of $0.47 a share. What is the total amount she received in her dividend check for this quarter?
   A.$0.47
   B.$47
   C.$94
   D.$103.40
   E.It is impossible to calculate the total dividend amount with this information.
2. Jo Bower owns 150 shares of Data General stock. She purchased the stock for $24 a share. She sold her stock for $30 a share. The commissions required to buy and sell her stock totaled $120. Assuming that she received no dividends during the time she owned the stock, what is her total return for this transaction?
   A.$600
   B.$780
   C.$900
   D.$2,400
   E.$3,000
3. A stock that remains stable during declines in the economy is called a(n) ______stock.
   A.defensive
4. Cyclical
5. Growth
6. Income
7. blue-chip
8. Assume that you purchased a $1,000 Exxon bond that pays 9.5 percent interest. What is the amount of interest you would receive each six months?
   A.$4.75
   B.$9.50
   C.$95
   D.$47.50
   E.$1,000
9. Generally, interest on corporate bonds is paid every:
   A.month.
   B.three months.
   C.six months.
   D.nine months.
   E.year.
10. An investment in which you loan a corporation, the federal government, or a municipality money to be paid back in semi-annual interest payments what type of investment do you own?
11. Stocks
12. Bonds
13. Mutual Funds
14. Real Estate
15. CDs

1. An investment in which money is pooled together and invested by a professional fund manager is what type of investment?
2. Stocks
3. Bonds
4. Mutual Funds
5. Real Estate
6. CDs
7. The value of the mutual fund's portfolio minus the mutual fund's liabilities divided by the number of shares outstanding is called the:
   A.book value.
   B.outstanding balance.
   C.per share value.
   D.net asset value.
   E.accounting value.
8. Assume you invest $3,000 in a mutual fund. Also assume the mutual fund pays you $50 dividends this year and that the mutual fun is worth $3,275 at the end of the year. What is your rate of return?
9. 8.4%
10. 9.9%
11. 10.8%
12. 0%
13. A fee that some investment companies charge for advertising and marketing a mutual fund is called a:
    A.14A-1 fee.
    B.12b-1 fee.
    C.18-2 fee.
    D.21-AB fee.
    E.None of these answers are correct.
14. Committing a set amount per month, and always purchasing securities with that money is an example of:
15. Allocation
16. Diversification
17. Dollar Cost Averaging
18. Buying on Margin
19. A stock that is expected to have higher rates of return (appreciation) and no dividends is:
20. Value Stock
21. Growth Stock
22. Defensive Stock
23. Index Stock

1. Earnings from a Roth IRA may be withdrawn after the account is 5 years old and:
2. After the investor is 50 years old.
3. For the down payment on a secondary home.
4. For higher education expenses for yourself, spouse, children or grandchildren.
5. If you want to donate to a charity.
6. All of the above
7. 401(k)s, Roth IRAs, Roth 401(k)s are examples of
8. Tax Deferred Programs
9. Defined Contribution Plans
10. Social Security Retirement Plans
11. Pre-tax Retirement Plans
12. An investor can borrow from his/her 401(k) or 403(b) with the following restrictions:
13. The interest must be repaid.
14. If you change jobs you must pay the repay the loan immediately.
15. If you default you must pay taxes due plus 10% penalty.
16. All of the above

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