Question 1

Anthony Edwards wants to diversify his portfolio by adding a stock that maintains a stable value when the economy declines. What type of stock does Anthony want to add to his portfolio?

Accepted Answer

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

Question 2

A stock that follows the business cycle of advances and declines in the economy is called a(n)  ____________ stock.

Accepted Answer

A)   defensive
B)   cyclical
C)   growth
D)   income
E)   blue-chipF) B) and E)
G) None of the above

Question 3

When a stock splits two-for-one, you should expect the price per share to:

Accepted Answer

A)   decrease to half its pre-split price.
B)   decrease in value by 75 percent or more.
C)   remain unchanged.
D)   increase to more than twice its pre-split price.
E)   increase to twice its pre-split price.F) B) and E)
G) B) and D) A

Question 4

What is the primary difference between common stock and preferred stock?

Accepted Answer

The answer of What is the primary difference between common...

Question 5

An investment theory based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company is called the ____________ theory.

Accepted Answer

A)   fundamental
B)   technical
C)   efficient market
D)   primary
E)   marketF) B) and E)
G) C) and D)

Question 6

Assume that you purchased 100 shares of a stock for $55 a share, that you received an annual dividend of $2.00 a share, and that you sold your stock for $65 a share at the end of one year. What is the total return on your investment? (Ignore commission amounts for this question.)

Accepted Answer

A)   $200
B)   $1,000
C)   $1,200
D)   $1,500
E)   $2,200F) C) and D)
G) B) and C)

Question 7

The type of stock in which stockholders are assured that omitted dividends will be paid to them before other dividends are paid is ____________ stock.

Accepted Answer

A)   common
B)   convertible preferred
C)   participating preferred
D)   cumulative preferred
E)   callable preferredF) B) and E)
G) C) and D)

Question 8

Which one of the following statements is true?

Accepted Answer

A)   Corporations are required by law to report all activities to their stockholders each month.
B)   Stockholders must approve major changes to corporate policies.
C)   Stockholders must approve the sale of all goods and services by the company.
D)   Corporations are required by law to have two stockholder meetings each year.
E)   Stockholders may vote only by proxy.F) A) and E)
G) A) and D)

Question 9

A stock issued by a company that has a market capitalization of $300 million or less would be classified as what type of stock?

Accepted Answer

A)   Micro cap
B)   Penny stock
C)   Midcap
D)   Small cap
E)   Blue chipF) C) and E)
G) B) and C) A

Question 10

Which one of the following is a true statement?

Accepted Answer

A)   An investment bank is a financial firm that assists organizations in raising funds.
B)   A corporation often deposits excess cash in an investment bank.
C)   An investment bank provides checking services for large corporations.
D)   Most investment banks help investors buy and sell a corporation's stock.
E)   Under current laws, an investment bank provides services to individuals but cannot provide banking services to corporations.F) C) and E)
G) A) and D)

Question 11

Sean Rouse owns shares of common stock in Stowaway Transportation Company. The company is getting ready to pay a dividend. Sean knows he must be registered on the corporation's books on the _______ date in order to receive the dividend.

Accepted Answer

A)   record
B)   ex-dividend
C)   payment date
D)   declaration
E)   stockholders' meetingF) A) and C)
G) B) and E) A

Question 12

Last year, High-Tech Electronics earned $1.50 per share. If the current market value for a share of stock is $45, what is the firm's P-E ratio?

Accepted Answer

A)   0.03
B)   3.30
C)   30.00
D)   33.00
E)   45.00F) B) and E)
G) A) and E)

Question 13

ABC Corporation has assets that total $12 million and liabilities that total $4 million. It also has 500,000 shares of stock outstanding. What is the ABC's book value per share?

Accepted Answer

A)   $32
B)   $24
C)   $16
D)   $8
E)   $0F) A) and B)
G) D) and E)

Question 14

A market order is a request that a stock be purchased or sold at the current market price.

Accepted Answer

A) True 
 B)False

Question 15

A large cap stock is a stock issued by a company that has capitalization of $10 billion or more.

Accepted Answer

A) True 
 B)False

Question 16

ABC Corporation holds its annual meeting in April. Maxine Star, who owns stock in the company, cannot attend the meeting. She can vote by:

Accepted Answer

A)   voluntary certificate.
B)   preemptive right.
C)   proxy.
D)   cumulative certificate.
E)   participatory certificate.F) B) and D)
G) B) and E)

Question 17

Before a 2-for-1 stock split, Lisa's stock was valued at $50 per share. What is her per share value after the split?

Accepted Answer

A)   $25
B)   $50
C)   $100
D)   $125
E)   $150F) A) and B)
G) B) and E)

Question 18

Which one of the following statements is true?

Accepted Answer

A)   It is possible to obtain financial information about a corporation that issues stock by using the Internet.
B)   While it is possible to obtain information about a company by accessing the Internet, the information is usually out of date.
C)   You can use an Internet search engine to only access a company's price information.
D)   Corporations have web pages but do not provide any financial information on them.
E)   By using the Yahoo! Finance website, investors can access financial information only about the economy as a whole.F) A) and D)
G) A) and C)

Question 19

Barker Creek Clothing has after-tax income of $12.8 million. It also has 32 million shares of stock outstanding. What is the firm's earnings per share?

Accepted Answer

A)   $4.48
B)   $3.20
C)   $1.28
D)   $0.40
E)   $0.80F) B) and E)
G) C) and D)

Question 20

A securities exchange is a marketplace where member brokers who are representing investors meet to buy and sell securities.

Accepted Answer

A) True 
 B)False

Exam 14: Investing in Stocks

Anthony Edwards wants to diversify his portfolio by adding a stock that maintains a stable value when the economy declines. What type of stock does Anthony want to add to his portfolio?

Correct AnswerverifiedShow Answer

A stock that follows the business cycle of advances and declines in the economy is called a(n) ____________ stock.

Correct AnswerverifiedShow Answer

When a stock splits two-for-one, you should expect the price per share to:

Correct AnswerverifiedA

What is the primary difference between common stock and preferred stock?

Correct AnswerverifiedShow Answer

An investment theory based on the assumption that a stock's intrinsic or real value is determined by the future earnings of the company is called the ____________ theory.

Correct AnswerverifiedShow Answer

Assume that you purchased 100 shares of a stock for $55 a share, that you received an annual dividend of $2.00 a share, and that you sold your stock for $65 a share at the end of one year. What is the total return on your investment? (Ignore commission amounts for this question.)

Correct AnswerverifiedShow Answer

The type of stock in which stockholders are assured that omitted dividends will be paid to them before other dividends are paid is ____________ stock.

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

A stock issued by a company that has a market capitalization of $300 million or less would be classified as what type of stock?

Correct AnswerverifiedA

Which one of the following is a true statement?

Correct AnswerverifiedShow Answer

Sean Rouse owns shares of common stock in Stowaway Transportation Company. The company is getting ready to pay a dividend. Sean knows he must be registered on the corporation's books on the _______ date in order to receive the dividend.

Correct AnswerverifiedA

Last year, High-Tech Electronics earned $1.50 per share. If the current market value for a share of stock is $45, what is the firm's P-E ratio?

Correct AnswerverifiedShow Answer

ABC Corporation has assets that total $12 million and liabilities that total $4 million. It also has 500,000 shares of stock outstanding. What is the ABC's book value per share?

Correct AnswerverifiedShow Answer

A market order is a request that a stock be purchased or sold at the current market price.

Correct AnswerverifiedShow Answer

A large cap stock is a stock issued by a company that has capitalization of $10 billion or more.

Correct AnswerverifiedShow Answer

ABC Corporation holds its annual meeting in April. Maxine Star, who owns stock in the company, cannot attend the meeting. She can vote by:

Correct AnswerverifiedShow Answer

Before a 2-for-1 stock split, Lisa's stock was valued at $50 per share. What is her per share value after the split?

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Barker Creek Clothing has after-tax income of $12.8 million. It also has 32 million shares of stock outstanding. What is the firm's earnings per share?

Correct AnswerverifiedShow Answer

A securities exchange is a marketplace where member brokers who are representing investors meet to buy and sell securities.

Correct AnswerverifiedShow Answer

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