Exam 16: Investment Concepts

An investor who wants to have a "hands on" approach to managing his or her investment portfolio in order to take advantage of market anomalies would want to follow the passive management style of investing.

A long-term investment strategy where investors purchase securities with the intent to keep them for a long period before liquidation is called

Because the simple arithmetic return does not consider compounding, its value will always be less than the geometric average return, unless the annual rates of return are constant.

The relative amount of personal funds, or initial equity, an investor has to "put up" when purchasing stocks on margin is called the initial margin requirement.

Organizations that help investors trade securities created by corporations and the government are called

Holding Period Return Portfolio -Refer to Portfolio.What was the one-year holding period return for the portfolio in 2011? Assume any dividend payments are included in the market value shown above.

Steve purchased a bond for $975.00.Ninety days later he received interest income of $40.00, and then immediately sold the bond for $990.00.What is the annualized rate of return Steve earned on this investment?

Once realistic goals have been formulated based on investment objectives and risk attitudes, the costs associated with the selection and purchase of the investment instruments is minimal.

Staci purchased a stock on April 12 for $78.00 and sold it on October 13 the same year, for $76.75.What is Staci's holding period return assuming she received a dividend of $2.20 per share on June 14, which was not reinvested?

Speculators are investors who view investments as instruments that produce growth over a long period of time.

The Securities Investor Protection Corporation insures the cash and securities held by the brokerage company from theft or loss of the security.Each investor is covered to a maximum of ____.

An investor purchased a share of AutheTec stock (AUTH) for $12.50.Three months later the stock was sold for $14.25.What is the holding period return earned by the investor?

You have an arrangement with your brokerage firm that allows you to purchase stock on margin with an initial margin requirement of 25 percent and a broker loan rate of 10 percent.What is the maximum amount of stock you can purchase on margin if you have $20,000 to invest?

The simple arithmetic average return differs from the geometric average return in that the geometric average takes into consideration compounding, or reinvestment, while the arithmetic average does not.

The degree of risk adversity exhibited by investors varies among individuals at any point in time and changes for individuals across time.

An order that gives instructions to cancel the order if the price conditions are not met by the end of the trading day is called a ____ order.

Use the following information to compute the simple arithmetic average return for Topwater Boats for the period from 2007 through 2012?

The holding period return associated with an interest-paying bond is computed by determining the change in the market value of the bond over a particular time period.

A stock purchased for $52 paid a dividend of $1 six days after it was purchased.The stock was sold for $51 ninety days after it was purchased.What is the annualized rate of return? Assume the dividend was not reinvested.

When one investor borrows stock from another investor and then immediately sells it in the market, but with a promise to replace the stock at some later date, he or she has executed a transaction that is called ____.