Question 1

Which one of the following is a true statement?

Accepted Answer

A)  The over-the-counter market is a network of dealers who buy and sell the stocks of corporations that are not listed on a securities exchange.
B)  Account executives buy or sell a particular stock to maintain an orderly market.
C)  OTC trading is for investors who want to buy or sell stocks in stores.
D)  Specialists are not members of the NYSE.
E)  Most NYSE members represent brokerage firms that do not charge commissions on security trades.F) All of the above
G) A) and E)

Question 2

If the average cost of a stock is $91.86 as determined by dollar cost averaging,which of the following is true?

Accepted Answer

A)  You would lose money only if you sold your stock at less than $91.86.
B)  You would gain money only if you sold your stock at less than $91.86.
C)  You would lose money only if you purchased additional stock at greater than $91.86.
D)  You would gain money only if you purchased additional stock at greater than $91.86.
E)  You would not lose nor gain money regardless of the average cost of the stock.F) A) and E)
G) A) and C) A

Question 3

Anthony Edwards wants to diversify his portfolio by adding a stock that maintains stable earnings 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) B) and D)
G) A) and C)

Question 4

Patsy Banz owns 200 shares of a stock.For the last calendar quarter,the company paid a dividend of $0.45 a share.What is the total amount she received in her dividend check for this quarter?

Accepted Answer

A)  $0.45
B)  $45.00
C)  $100.00
D)  $90.00
E)  $200.00F) A) and D)
G) All of the above D

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Christopher Pratt just bought shares of common stock.Which one of the following is he entitled to based on his ownership of these shares?

Accepted Answer

A)  Semiannual interest payments
B)  Guaranteed annual dividends
C)  Right to vote at annual meetings
D)  Right to declare a stock split
E)  Right to declare future dividendsF) A) and E)
G) C) and D)

Question 7

Masterworks Manufacturing has calculated its earnings per share as $1.25.If the corporation has 500,000 shares outstanding,what is the amount of after-tax income?

Accepted Answer

A)  $12,500
B)  $62,500
C)  $125,000
D)  $625,000
E)  $6,250,000F) C) and D)
G) D) and E)

Question 8

George Clancy wants to diversify his portfolio by adding a stock that has a value which moves in direct relation to the business cycle.What type of stock is George thinking about adding to his portfolio?

Accepted Answer

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

Question 9

Common stock dividends are paid out of profits and:

Accepted Answer

A)  must be approved by the corporation's board of directors.
B)  are guaranteed to be paid quarterly.
C)  are paid prior to the firm's taxes.
D)  are usually paid semiannually.
E)  equal 100 percent of the firm's annual earnings.F) D) and E)
G) A) and B)

Question 10

Most speculators purchase stock and hold onto it for a number of years.

Accepted Answer

A) True 
 B)False

Question 11

Which one of the following statements is false?

Accepted Answer

A)  Numerical measures can help investors decide if it is time to buy or sell a stock.
B)  Future earnings may be one of the most significant factors to examine when evaluating a stock.
C)  Higher earnings generally equate to higher stock prices.
D)  The price for a share of stock is determined by what another investor is willing to pay for it.
E)  Few investors consider earnings per share when evaluating the financial health of a corporation.F) A) and B)
G) B) and D)

Question 12

Acme Widget,Inc.has one million shares of common stock outstanding at a price per share of $62.50.The company earned $6 million after taxes.The annual dividend is $2.50 per share.The company has assets of $250,000,000 and liabilities of $50,000,000.What is the dividend yield?

Accepted Answer

A)  1 percent
B)  2 percent
C)  3 percent
D)  4 percent
E)  5 percentF) A) and E)
G) D) and E)

Question 13

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 B)
G) B) and E)

Question 14

Mary Smith purchased 100 shares of Johnson electronics four years ago at $15.00 each.She paid a $30 commission on this transaction.She has decided to sell these shares at $25.00 each and will incur a $25 commission on this sale.What is the amount of her capital gain?

Accepted Answer

A)  $945
B)  $1,530
C)  $2,475
D)  $2,500
E)  $3,000F) A) and D)
G) C) and E)

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Mary Smith purchased 100 shares of Johnson electronics four years ago at $15.00 each.She paid a $30 commission on this transaction.She has decided to sell these shares at $25.00 each and will incur a $25 commission on this sale.What is the total investment amount?

Accepted Answer

A)  $1,000
B)  $1,500
C)  $1,530
D)  $2,475
E)  $2,500F) C) and E)
G) A) and E)

Question 17

When completing stock transactions,payment for stocks is generally required within ________ business days after the transaction.

Accepted Answer

A)  3
B)  1
C)  2
D)  4
E)  5F) None of the above
G) A) and B)

Question 18

The stock exchange known to trade stock for innovative,forward-looking growth companies is the:

Accepted Answer

A)  NYSE.
B)  NASDAQ.
C)  American Stock exchange.
D)  S&P 100.
E)  STSE.F) B) and D)
G) B) and E)

Question 19

An increase in a corporation's earnings per share is a healthy sign.

Accepted Answer

A) True 
 B)False  True

Question 20

Which one of the following statements is true regarding selling short?

Accepted Answer

A)  When an investor buys stocks and assumes they will increase in value,he or she is using a procedure called selling short.
B)  Selling short is selling stock that has been borrowed from a brokerage firm.
C)  When you sell short,you buy today,knowing you must sell or cover your short transaction,at a later date.
D)  In a short transaction,if the stock increases in value,the investor makes money.
E)  To make money in a short transaction,you must hold on the stock for at least one year.F) A) and D)
G) B) and E)

Exam 14: Investing in Stocks

Which one of the following is a true statement?

Correct AnswerverifiedShow Answer

If the average cost of a stock is $91.86 as determined by dollar cost averaging,which of the following is true?

Correct AnswerverifiedA

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

Correct AnswerverifiedShow Answer

Patsy Banz owns 200 shares of a stock.For the last calendar quarter,the company paid a dividend of $0.45 a share.What is the total amount she received in her dividend check for this quarter?

Correct AnswerverifiedD

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

Correct AnswerverifiedShow Answer

Christopher Pratt just bought shares of common stock.Which one of the following is he entitled to based on his ownership of these shares?

Correct AnswerverifiedShow Answer

Masterworks Manufacturing has calculated its earnings per share as $1.25.If the corporation has 500,000 shares outstanding,what is the amount of after-tax income?

Correct AnswerverifiedShow Answer

George Clancy wants to diversify his portfolio by adding a stock that has a value which moves in direct relation to the business cycle.What type of stock is George thinking about adding to his portfolio?

Correct AnswerverifiedShow Answer

Common stock dividends are paid out of profits and:

Correct AnswerverifiedShow Answer

Most speculators purchase stock and hold onto it for a number of years.

Correct AnswerverifiedShow Answer

Which one of the following statements is false?

Correct AnswerverifiedShow Answer

Acme Widget,Inc.has one million shares of common stock outstanding at a price per share of $62.50.The company earned $6 million after taxes.The annual dividend is $2.50 per share.The company has assets of $250,000,000 and liabilities of $50,000,000.What is the dividend yield?

Correct AnswerverifiedShow Answer

Which one of the following statements is true?

Correct AnswerverifiedShow Answer

Mary Smith purchased 100 shares of Johnson electronics four years ago at $15.00 each.She paid a $30 commission on this transaction.She has decided to sell these shares at $25.00 each and will incur a $25 commission on this sale.What is the amount of her capital gain?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Mary Smith purchased 100 shares of Johnson electronics four years ago at $15.00 each.She paid a $30 commission on this transaction.She has decided to sell these shares at $25.00 each and will incur a $25 commission on this sale.What is the total investment amount?

Correct AnswerverifiedShow Answer

When completing stock transactions,payment for stocks is generally required within ________ business days after the transaction.

Correct AnswerverifiedShow Answer

The stock exchange known to trade stock for innovative,forward-looking growth companies is the:

Correct AnswerverifiedShow Answer

An increase in a corporation's earnings per share is a healthy sign.

Correct AnswerverifiedTrue

Which one of the following statements is true regarding selling short?

Correct AnswerverifiedShow Answer

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