Question 1

Corporations issue preferred stock because it provides an alternative to financing through corporate bonds or common stock.

Accepted Answer

A) True 
 B)False

Question 2

Describe the steps involved in a typical margin transaction.

Accepted Answer

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Question 3

The price-earnings ratio is not affected by an increase or decrease in the firm's earnings.

Accepted Answer

A) True 
 B)False

Question 4

A market in which an investor purchases financial securities (via an investment bank or other representative from the issuer of those securities is called the ____________ market.

Accepted Answer

A)   technical
B)   fundamental
C)   efficient
D)   secondary
E)   primaryF) All of the above
G) A) and B)

Question 5

A bear market develops when investors are optimistic about the overall economy and purchase stocks.

Accepted Answer

A) True 
 B)False

Question 6

The price-earnings ratio is calculated by dividing the earnings per share of a stock by its fair market value.

Accepted Answer

A) True 
 B)False

Question 7

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Accepted Answer

A) True 
 B)False

Question 8

When investors purchase stock on margin,they borrow stock from a stockbroker or brokerage firm.

Accepted Answer

A) True 
 B)False

Question 9

The annual shareholder return is the beginning-of-year stock price divided by the stocks annual dividend.

Accepted Answer

A) True 
 B)False

Question 10

Why would an investor favor a common share over a preferred share?

Accepted Answer

A)   To obtain a bigger potential capital gain.
B)   To obtain repayment of the face value at maturity.
C)   To obtain a fixed dividend.
D)   To obtain a fixed coupon payment.
E)   To obtain a variable dividendF) A) and B)
G) A) and C)

Question 11

A stock that pays higher than average dividends is called an income stock.

Accepted Answer

A) True 
 B)False

Question 12

The type of stock that may earn more than the stated dividend if the firm has a good year is ____________ stock.

Accepted Answer

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

Question 13

By using the Canada.Com Finance Web site,an investor can find information on all of the following except

Accepted Answer

A)   inside information.
B)   the corporation's stock symbol.
C)   current market values.
D)   research information.
E)   historical market quotes.F) B) and E)
G) C) and D)

Question 14

Which of these is not a sign for potential online investment scams?

Accepted Answer

A)   high pressure tactics to buy from people you do not know
B)   promises of high profits and sales relating to products of a new company
C)   large-cap companies that pay a generous executive salary
D)   reverse splits
E)   small-cap companies investing in projects unrelated to their businessesF) B) and D)
G) B) and C)

Question 15

You shouldn't be wary of any stocks that you learn about on financial bulletin boards,chat room,newsgroups or email.

Accepted Answer

A) True 
 B)False

Question 16

Oil-Slick Shipping stock was priced at $70 at the beginning of the year.Over the year the corporation paid a dividend of $3.25 and its stock price at year-end was $65.What is the trailing dividend yield?

Accepted Answer

A)   4.6 percent
B)   4 percent
C)   5 percent
D)   5.4 percent
E)   6 percentF) A) and B)
G) A) and E)

Question 17

To calculate the annual dividend yield,the annual dividend is divided by the stock's

Accepted Answer

A)   current price.
B)   historical average price.
C)   future price.
D)   beginning-of-year price.
E)   end-of-year price.F) All of the above
G) A) and C)

Question 18

Laws which are enforced by a federal regulatory body for the securities industry have been put in place to protect investors.

Accepted Answer

A) True 
 B)False

Question 19

A large-cap stock is a stock issued by a company that has capitalization of $150 million or less.

Accepted Answer

A) True 
 B)False

Question 20

Marianne Walsh bought XYZ Corporation stocks for $26 a share at the beginning of 2001.At year-end,she received a dividend of $1.75 per share and then sold the stock for $30.50 a share.What was Marianne's annual shareholder return on the investment?

Accepted Answer

A)   6.25 percent
B)   10.83 percent
C)   17.31 percent
D)   20.49 percent
E)   24.04 percentF) C) and E)
G) C) and D)

Exam 11: Investing Basics and Evaluating Bonds

By using the Canada.Com Finance Web site,an investor can find information on all of the following except

Correct AnswerverifiedShow Answer

Which of these is not a sign for potential online investment scams?

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When investors purchase stock on margin,they borrow stock from a stockbroker or brokerage firm.

Correct AnswerverifiedShow Answer

The annual shareholder return is the beginning-of-year stock price divided by the stocks annual dividend.

Correct AnswerverifiedShow Answer

Marianne Walsh bought XYZ Corporation stocks for $26 a share at the beginning of 2001.At year-end,she received a dividend of $1.75 per share and then sold the stock for $30.50 a share.What was Marianne's annual shareholder return on the investment?

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A stock that pays higher than average dividends is called an income stock.

Correct AnswerverifiedShow Answer

Corporations issue preferred stock because it provides an alternative to financing through corporate bonds or common stock.

Correct AnswerverifiedShow Answer

A large-cap stock is a stock issued by a company that has capitalization of $150 million or less.

Correct AnswerverifiedShow Answer

The price-earnings ratio is calculated by dividing the earnings per share of a stock by its fair market value.

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A market in which an investor purchases financial securities (via an investment bank or other representative from the issuer of those securities is called the ____________ market.

Correct AnswerverifiedShow Answer

Laws which are enforced by a federal regulatory body for the securities industry have been put in place to protect investors.

Correct AnswerverifiedShow Answer

Why would an investor favor a common share over a preferred share?

Correct AnswerverifiedShow Answer

Oil-Slick Shipping stock was priced at $70 at the beginning of the year.Over the year the corporation paid a dividend of $3.25 and its stock price at year-end was $65.What is the trailing dividend yield?

Correct AnswerverifiedShow Answer

Describe the steps involved in a typical margin transaction.

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The price-earnings ratio is not affected by an increase or decrease in the firm's earnings.

Correct AnswerverifiedShow Answer

A cyclical stock is a stock that follows the business cycle of advances and declines in the economy.

Correct AnswerverifiedShow Answer

To calculate the annual dividend yield,the annual dividend is divided by the stock's

Correct AnswerverifiedShow Answer

The type of stock that may earn more than the stated dividend if the firm has a good year is ____________ stock.

Correct AnswerverifiedShow Answer

A bear market develops when investors are optimistic about the overall economy and purchase stocks.

Correct AnswerverifiedShow Answer

You shouldn't be wary of any stocks that you learn about on financial bulletin boards,chat room,newsgroups or email.

Correct AnswerverifiedShow Answer

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