Question 1

A corporate bond is a written pledge of a government or a municipality to repay a specified sum of money, along with interest.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would be considered a safe investment?

Accepted Answer

A)   Options
B)   Collectibles
C)   Precious metals
D)   Savings accounts
E)   CommoditiesF) C) and D)
G) B) and E)

Question 3

If your main focus is to have your investments increase in value, you are most concerned with

Accepted Answer

A)   Income.
B)   Growth.
C)   Liquidity.
D)   Business failure risk.
E)   Market risk.F) None of the above
G) B) and C)

Question 4

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer investments with less risk.

Accepted Answer

A) True 
 B)False

Question 5

When comparing the interest rates for U.S. government securities, which of the following is correct?

Accepted Answer

A)   Treasury bonds 
B)   Treasury bills 
C)   Treasury notes 
D)   Treasury bills 
E)   Treasury bonds < Treasury notes < Treasury billsF) C) and D)
G) D) and E)

Question 6

Investment goals are always oriented to the future.

Accepted Answer

A) True 
 B)False

Question 7

Investments that earn a lower rate of interest will have a higher total dollar return than those that earn a high rate of interest.

Accepted Answer

A) True 
 B)False

Question 8

After you purchase an investment, you should

Accepted Answer

A)   Assume that your investment is tax-free.
B)   Continually evaluate your investment.
C)   Ignore other potential investments.
D)   Leave recordkeeping to the financial adviser.
E)   Let the investment manage itself.F) C) and D)
G) A) and D)

Question 9

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

Accepted Answer

A)   Treasury bill.
B)   Savings bond.
C)   Revenue bond.
D)   General obligation bond.
E)   Agency bond.F) A) and B)
G) A) and C)

Question 10

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

Accepted Answer

A)   Subordinated bond.
B)   Treasury bill.
C)   Treasury note.
D)   Treasury bond.
E)   Savings bond.F) A) and C)
G) A) and D)

Question 11

Which of the following statements is true?

Accepted Answer

A)   Convertible corporate bonds are more secure than government bonds.
B)   Convertible bonds often pay 1-2% more interest than nonconvertible bonds.
C)   Because of the conversion feature, it is not necessary to evaluate convertible corporate bonds.
D)   Investors enjoy the lower risk of a corporate bond but also take advantage of the speculative nature of common stock.
E)   Even after convertible bondholders convert their investments to common stock, the bondholders still receive interest payments.F) A) and B)
G) A) and E)

Question 12

The potential return on any investment should be directly related to the risk that the investor assumes.

Accepted Answer

A) True 
 B)False

Question 13

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80.

Accepted Answer

A) True 
 B)False

Question 14

Younger investors tend to invest in more growth-oriented investments, because they do not have time to recover if their investments take a nosedive.

Accepted Answer

A) True 
 B)False

Question 15

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following investments typically has the most risk?

Accepted Answer

A)   Government bonds
B)   Cash
C)   Cash equivalents
D)   Certificates of deposit
E)   StocksF) B) and D)
G) A) and B)

Question 17

If you need access to your funds in two years or less, which of the following investments would be least appropriate?

Accepted Answer

A)   Cash
B)   Certificates of deposit
C)   Short-term government bonds
D)   Highly rated corporate bonds
E)   Stocks and mutual fundsF) A) and C)
G) C) and E)

Question 18

With business failure risk, you face the possibility that good management and successful products will cause the business to be less profitable than originally anticipated.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following investors would mostly prefer conservative investments with less risk to speculative investments with higher risks?

Accepted Answer

A)   A 25-year-old single investor with no children with a job that pays $60,000 per year
B)   An unemployed single parent who just received a $300,000 divorce settlement
C)   A 30-year-old who in independently wealthy and has a separate trust fund for day-to-day expenses
D)   A dual-career couple in their 30s with secure jobs whose combined income is $95,000
E)   A healthy 45-year-old who plans to work in his secure job for at least 25 more yearsF) B) and E)
G) B) and D)

Question 20

A valid short-term investment goal is

Accepted Answer

A)   Saving $4,000 per year for retirement.
B)   Spending less than $500 per month for housing.
C)   Accumulating $3,000 in a savings account over the next 12 months.
D)   Using credit cards less in the next six months.
E)   Purchasing a $250,000 life insurance policy within the next four years.F) B) and D)
G) A) and B)

Exam 11: Investing Fundamentals and Bonds

Investments that earn a lower rate of interest will have a higher total dollar return than those that earn a high rate of interest.

Correct AnswerverifiedShow Answer

A corporate bond is a written pledge of a government or a municipality to repay a specified sum of money, along with interest.

Correct AnswerverifiedShow Answer

A U.S. government security issued in $100 units with maturities of more than 1 year but not more than 10 years is called a

Correct AnswerverifiedShow Answer

An easy way to determine what percentage of your assets should be invested in growth investments is to take your age and subtract it from 80.

Correct AnswerverifiedShow Answer

An unemployed single parent who just received a $300,000 divorce settlement would likely prefer investments with less risk.

Correct AnswerverifiedShow Answer

The potential return on any investment should be directly related to the risk that the investor assumes.

Correct AnswerverifiedShow Answer

If your main focus is to have your investments increase in value, you are most concerned with

Correct AnswerverifiedShow Answer

Investment goals are always oriented to the future.

Correct AnswerverifiedShow Answer

After you purchase an investment, you should

Correct AnswerverifiedShow Answer

A bond that is repaid from the income generated by the project it is designed to finance is called a(n)

Correct AnswerverifiedShow Answer

Which of the following investments typically has the most risk?

Correct AnswerverifiedShow Answer

In the event of bankruptcy, stockholders have a claim to assets of the corporation before bondholders.

Correct AnswerverifiedShow Answer

If you need access to your funds in two years or less, which of the following investments would be least appropriate?

Correct AnswerverifiedShow Answer

Younger investors tend to invest in more growth-oriented investments, because they do not have time to recover if their investments take a nosedive.

Correct AnswerverifiedShow Answer

A valid short-term investment goal is

Correct AnswerverifiedShow Answer

With business failure risk, you face the possibility that good management and successful products will cause the business to be less profitable than originally anticipated.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following investors would mostly prefer conservative investments with less risk to speculative investments with higher risks?

Correct AnswerverifiedShow Answer

When comparing the interest rates for U.S. government securities, which of the following is correct?

Correct AnswerverifiedShow Answer

Which of the following would be considered a safe investment?

Correct AnswerverifiedShow Answer

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