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

1