Question 1

To be broker or to trade securities you must

Accepted Answer

A)  abide by ethical standards established by the SEC. 
B)  abide by any licensing or registration requirements of state in which you trade. 
C)  be licensed by the exchanges on which the traded securities are listed. 
D)  All of the above. 
A)  abide by ethical standards established by the SEC. 
B)  abide by any licensing or registration requirements of state in which you trade. 
C)  be licensed by the exchanges on which the traded securities are listed. 
D)  All of the above.

Question 2

More stock certificates are registered in the names of individual investors than in street names (i.e., brokerage firms).

Accepted Answer

A) True 
 B)False

Question 3

The simple arithmetic average return for the common stock of Saltwater Expeditions Incorporated for the eight-year period from 2005 through 2012 was 21 percent.The one-year holding period returns from 2005 through 2011 are given below.What is the implied one-year holding period return for 2012?

Accepted Answer

A)  21.4% 
B)  24.4% 
C)  3.0% 
D)  13.0% 
E)  −3.0% 
A)  21.4% 
B)  24.4% 
C)  3.0% 
D)  13.0% 
E)  −3.0%

Question 4

Geometric Average Return
Foxy Ladies Investment Club
The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010.A summary of their portfolio is given below:  
-Refer to Foxy Ladies Investment Club.What was the 12-month holding period return for Merck during 2012?

Accepted Answer

A)  39.2% 
B)  29.5% 
C)  −37.3% 
D)  41.0% 
E)  26.2% 
A)  39.2% 
B)  29.5% 
C)  −37.3% 
D)  41.0% 
E)  26.2%

Question 5

A firm that offers clients only the basic services associated with trading securities is called a(n)

Accepted Answer

A)  Discount Brokerage Firm. 
B)  Investment Banker. 
C)  Financial Intermediary. 
D)  Full-service brokerage firm. 
E)  None of the above. 
A)  Discount Brokerage Firm. 
B)  Investment Banker. 
C)  Financial Intermediary. 
D)  Full-service brokerage firm. 
E)  None of the above.

Question 6

All of the following are examples of transactions costs for buying securities except

Accepted Answer

A)  time costs 
B)  bid/ask spread 
C)  brokerage fees 
D)  telephone calls 
E)  all of the above are example of transaction costs 
A)  time costs 
B)  bid/ask spread 
C)  brokerage fees 
D)  telephone calls 
E)  all of the above are example of transaction costs

Question 7

To determine the weighted average returns of stocks held in a portfolio, the weights are determined as the fraction

Accepted Answer

A)  of the total portfolio value of each stock at the midpoint of the holding period. 
B)  of the total portfolio value of each stock at the end of the holding period. 
C)  of the total portfolio average value of each stock during the holding period. 
D)  of the total portfolio invested in each stock at the beginning of the holding period. 
A)  of the total portfolio value of each stock at the midpoint of the holding period. 
B)  of the total portfolio value of each stock at the end of the holding period. 
C)  of the total portfolio average value of each stock during the holding period. 
D)  of the total portfolio invested in each stock at the beginning of the holding period.

Question 8

A market order, which is an order to trade at the best price available when the transaction reaches the market, is the most common type of order placed by investors.

Accepted Answer

A) True 
 B)False

Question 9

The hypothecation agreement, which is the legal document an investor signs when he or she trades stock on margin, includes the maximum amount by which the price of the stock can increase before the amount borrowed from the broker must be repaid.

Accepted Answer

A) True 
 B)False

Question 10

Geometric Average Return
Foxy Ladies Investment Club
The Foxy Ladies Investment Club purchased 100 shares of common stock each in Coca-Cola, Intel, and Merck on January 02, 2010.A summary of their portfolio is given below:  
-Refer to Foxy Ladies Investment Club.What is the portfolio's three-year holding period return (from January 2010 through December 2012)?

Accepted Answer

A)  71.8% 
B)  23.9% 
C)  68.3% 
D)  22.8% 
E)  None of the above. 
A)  71.8% 
B)  23.9% 
C)  68.3% 
D)  22.8% 
E)  None of the above.

Question 11

Angela Johnson bought Microsoft stock many years ago when the company was very young; so, clearly, she has done very well with her investment.Now that Microsoft is more established, its stock price has started to falter somewhat.Angela really thinks that Microsoft will continue to be a good investment in the future, so she plans to stay in the stock for the time being.However, at the same time, she wants to protect the profits she has already amassed.She follows the market every day, so she is confident she can initiate a sell order when necessary to ensure she receives the gains she has realized to this point.Unfortunately, Angela is leaving the country for an extended vacation in China, where she will be out of touch with the investment world, and she is worried that something might happen to Microsoft during the time she is gone that will substantially decrease the "paper" profits she now has.Given that Angela believes Microsoft will continue its upward movement but she also wants to protect her "paper" profits, which of the following orders should she place with her broker before she leaves for China?

Accepted Answer

A)  Market sell 
B)  Stop (sell) 
C)  Limit (sell) 
D)  Fill or kill 
E)  Margin sell 
A)  Market sell 
B)  Stop (sell) 
C)  Limit (sell) 
D)  Fill or kill 
E)  Margin sell

Question 12

The simple arithmetic average return and the geometric average return will be equal only if the annual returns are increasing over time.

Accepted Answer

A) True 
 B)False

Question 13

The expected return on a portfolio is

Accepted Answer

A)  the sum of the square root of the expected returns on the individual stocks included in the portfolio times the beta of the individual stocks. 
B)  the simple arithmetic average of the expected returns on the individual stocks included in the portfolio. 
C)  the geometric average of the expected returns on the individual stocks included in the portfolio. 
D)  the weighted average of the expected returns on the individual stocks included in the portfolio. 
A)  the sum of the square root of the expected returns on the individual stocks included in the portfolio times the beta of the individual stocks. 
B)  the simple arithmetic average of the expected returns on the individual stocks included in the portfolio. 
C)  the geometric average of the expected returns on the individual stocks included in the portfolio. 
D)  the weighted average of the expected returns on the individual stocks included in the portfolio.

Question 14

When an investor trades on margin, he or she borrows from the broker some of the funds needed to purchase securities.

Accepted Answer

A) True 
 B)False

Question 15

The return on an investment is generated by any income produced by the investment and any change in the value, or the price, of the investment.

Accepted Answer

A) True 
 B)False

Question 16

To trade securities an individual must be licensed by the exchanges on which the traded securities are listed.

Accepted Answer

A) True 
 B)False

Question 17

The proportion of funds invested in various categories of assets, such as money market instruments, long-term debt, stocks, and real estate is referred to as

Accepted Answer

A)  Investment portfolio summation. 
B)  Asset allocation. 
C)  Risk tolerance level. 
D)  Expected return. 
E)  None of the above. 
A)  Investment portfolio summation. 
B)  Asset allocation. 
C)  Risk tolerance level. 
D)  Expected return. 
E)  None of the above.

Question 18

Discount brokers can offer trades at lower commissions than full service brokers because they require all of their clients to trade electronically rather than through a broker.

Accepted Answer

A) True 
 B)False

Question 19

When an investor places an order to trade stock with his or her broker, as long as the market is open, it is always executed as soon as possible.

Accepted Answer

A) True 
 B)False

Question 20

Use the information below to solve for the dividend yield for Lowes.

Accepted Answer

A)  1.9% 
B)  1.4% 
C)  2.6% 
D)  0.9% 
E)  None of the above. 
A)  1.9% 
B)  1.4% 
C)  2.6% 
D)  0.9% 
E)  None of the above.

To be broker or to trade securities you must

More stock certificates are registered in the names of individual investors than in street names (i.e., brokerage firms).

The simple arithmetic average return for the common stock of Saltwater Expeditions Incorporated for the eight-year period from 2005 through 2012 was 21 percent.The one-year holding period returns from 2005 through 2011 are given below.What is the implied one-year holding period return for 2012?

A firm that offers clients only the basic services associated with trading securities is called a(n)

All of the following are examples of transactions costs for buying securities except

To determine the weighted average returns of stocks held in a portfolio, the weights are determined as the fraction

A market order, which is an order to trade at the best price available when the transaction reaches the market, is the most common type of order placed by investors.

The hypothecation agreement, which is the legal document an investor signs when he or she trades stock on margin, includes the maximum amount by which the price of the stock can increase before the amount borrowed from the broker must be repaid.

The simple arithmetic average return and the geometric average return will be equal only if the annual returns are increasing over time.

The expected return on a portfolio is

When an investor trades on margin, he or she borrows from the broker some of the funds needed to purchase securities.

The return on an investment is generated by any income produced by the investment and any change in the value, or the price, of the investment.

To trade securities an individual must be licensed by the exchanges on which the traded securities are listed.

The proportion of funds invested in various categories of assets, such as money market instruments, long-term debt, stocks, and real estate is referred to as

Discount brokers can offer trades at lower commissions than full service brokers because they require all of their clients to trade electronically rather than through a broker.

When an investor places an order to trade stock with his or her broker, as long as the market is open, it is always executed as soon as possible.

Use the information below to solve for the dividend yield for Lowes.

An Overview of Finance

Financial Assets Instruments

Financial Markets and the Investment Banking Process

Financial Intermediaries and the Banking System

The Cost of Money Interest Rates

Business Organizations and the Tax Environment

Analysis of Financial Statements

Financial Planning and Control

Time Value of Money

Valuation Concepts

Risk and Rates of Return

The Cost of Capital

Capital Budgeting

Capital Structure and Dividend Policy Decisions

Working Capital Management

Security Valuation and Selection

Filters

Exam 16: Investment Concepts

To be broker or to trade securities you must

More stock certificates are registered in the names of individual investors than in street names (i.e., brokerage firms).

The simple arithmetic average return for the common stock of Saltwater Expeditions Incorporated for the eight-year period from 2005 through 2012 was 21 percent.The one-year holding period returns from 2005 through 2011 are given below.What is the implied one-year holding period return for 2012?

A firm that offers clients only the basic services associated with trading securities is called a(n)

All of the following are examples of transactions costs for buying securities except

To determine the weighted average returns of stocks held in a portfolio, the weights are determined as the fraction

A market order, which is an order to trade at the best price available when the transaction reaches the market, is the most common type of order placed by investors.

The hypothecation agreement, which is the legal document an investor signs when he or she trades stock on margin, includes the maximum amount by which the price of the stock can increase before the amount borrowed from the broker must be repaid.

The simple arithmetic average return and the geometric average return will be equal only if the annual returns are increasing over time.

The expected return on a portfolio is

When an investor trades on margin, he or she borrows from the broker some of the funds needed to purchase securities.

The return on an investment is generated by any income produced by the investment and any change in the value, or the price, of the investment.

To trade securities an individual must be licensed by the exchanges on which the traded securities are listed.

The proportion of funds invested in various categories of assets, such as money market instruments, long-term debt, stocks, and real estate is referred to as

Discount brokers can offer trades at lower commissions than full service brokers because they require all of their clients to trade electronically rather than through a broker.

When an investor places an order to trade stock with his or her broker, as long as the market is open, it is always executed as soon as possible.

Use the information below to solve for the dividend yield for Lowes.

An Overview of Finance

Financial Assets Instruments

Financial Markets and the Investment Banking Process

Financial Intermediaries and the Banking System

The Cost of Money Interest Rates

Business Organizations and the Tax Environment

Analysis of Financial Statements

Financial Planning and Control

Time Value of Money

Valuation Concepts

Risk and Rates of Return

The Cost of Capital

Capital Budgeting

Capital Structure and Dividend Policy Decisions

Working Capital Management

Security Valuation and Selection

Filters