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Question 1. 1. (TCO 5) If an investment objective is short term, this means that the goal should be achieved in what time frame? Less than 6 months In 2–5 years More than 5 years A year or less None of the above Question 2. 2. (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

Question 3. 3. (TCO 5) You currently hold a $1,000 corporate bond; however, if interest rates in the overall economy increase, which of the following is most likely to be the market value of this bond?

$900

$1,100

$1,000

The value of the bond will not change.

It is impossible to determine whether the bond's value will increase or decrease.


Question 4. 4. (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.

Question 5. 5. (TCO 5) Mary Ann recently received a $20,000 gift from her uncle and is considering investing in stocks, because she knows that historically they have earned an approximately 10–12% rate of return over the last few years. Referring to aspects of investing, Mary Ann is most concerned about which of the following?

Risk

Return


Diversification

Liquidity

Income

Question 6. 6. (TCO 5) A $1,000 corporate bond pays 6.5% a year. What is the annual interest you will receive?

$0.65

$6.50

$65.00

$1,060.50

$1,065.00


Question 7. 7. (TCO 5) Jeremy is 22 years old and single. He recently graduated from college and started his career making $30,000 a year. He has come to you asking for advice regarding a long-term investment program. What would you recommend?

Growth stocks

Government bonds

Corporate bonds

Commodities

A money-market fund

Question 8. 8. (TCO 5) Tracey Hernandez is 26 and has saved enough money for an emergency fund, along with an additional $4,500 for an investment program. She is single with no dependents and has a desire to retire at 65. What would best characterize Ms. Hernandez's investment goal?

Beta

Income


Growth

Risk

Liquidity

Question 9. 9. (TCO 5) Matt Dannon just bought the stock of a company that provides him with the responsibility to approve major company actions. Which one of the following best characterizes this responsibility?

Voting rights

Proxy

Equity

Dividends

None of the above


Question 10. 10. (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. 11. (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

Question 12. 12. (TCO 5) A very safe investment that generally attracts conservative investors is called a(n) _____ stock.

penny

cyclical

growth

small cap

blue chip


Question 13. 13. (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.

Question 14. 14. (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. 15. (TCO 5) Corporate bonds typically pay interest every

month.

6 months.

3 months.

9 months.

year.


Question 16. 16. (TCO 5) The _____ is the financially independent firm or individual that acts as the bondholders' representative.

trustee

president of the corporation

debenture holder

indenture holder

chairman of the board

Question 17. 17. (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. 18. (TCO 5) A(n) _____ bond is one that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock.

debenture

convertible

indenture

flexible

subordinated


Question 19. 19. (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. 20. (TCO 5) A _____ bond is registered in the owner's name by the issuing company.

certified

coupon

general obligation


zero-coupon registered


Busn 380 week 4 quiz set 2