Deck 11: Investment Planning

Question 1

Common stock pays interest payments on a quarterly basis.

Answer 1

False

Question 2

Preferred stocks are the common stocks of ultra blue-chip companies.

Answer 2

False

Question 3

Newly issued securities are sold to the public in the secondary market.

Answer 3

False

Question 4

Owning common stock represents a debt investment.

Question 5

Investing is considered a short-term activity that involves the buying and selling of securities.

Question 6

Your goals tend to set the tone for your investment program,and they play a major role in determining how conservative or aggressive you're likely to be in making investment decisions.

Question 7

The major reason most people invest is to shelter current income from taxes.

Question 8

Listed securities are traded on organized exchanges.

Question 9

The term "investment' refers to money placed in some medium where value and level of return are totally unpredictable.

Question 10

Two prerequisites to investing are above average risk and clear understanding of market direction.

Question 11

Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.

Question 12

A systematic investment routine involves investing similar sums in regular intervals.

Question 13

A statement specifying how investment capital will be invested in order to reach targeted goals is called a marketing plan.

Question 14

Long-term securities are traded in the primary market.

Question 15

Common stock generally allows the stockholder to vote on issues of corporate governance.

Question 16

A prospectus describes the firm and the issue of a new security.

Question 17

An individual is more likely to use the secondary markets than the primary market.

Question 18

When completed,an investment plan is a way of translating an abstract investment target into a specific investment program.

Question 19

Investing and speculating are two entirely different activities.

Question 20

If a company's shares are traded on the New York Stock Exchange,the company is a member of the exchange.

Question 21

NASDAQ is now the second largest securities market in the U.S.

Question 22

Brokers charge a commission on security purchases as well as on security sales.

Question 23

Prices are rising in bear markets,indicating economic optimism.

Question 24

All OTC stocks are part of NASDAQ.

Question 25

The Securities Investor Protection Corporation insurance guarantees the dollar value of your securities will not dip below a certain level.

Question 26

A retail stockbroker buys and sells securities on behalf of clients.

Question 27

The federal government regulates securities markets through the Securities and Exchange Commission.

Question 28

A market order to sell would be filled at the highest price available that day.

Question 29

The bid price would be the price paid by an investor for an OTC stock.

Question 30

An odd lot transaction is generally more expensive than a round lot transaction.

Question 31

There are 50 shares in a round lot.

Question 32

A round lot consists of multiples of 100 shares of stock.

Question 33

Preferred stock combines the fixed income features of bonds with the same price appreciation potential as common stocks.

Question 34

A sale of 450 shares of stock would involve the trade of an odd lot.

Question 35

Discount brokers discount the price of securities to below the prevailing market price.

Question 36

According to recent legislation,under the FDIC each brokerage account is insured up to $250,000.

Question 37

The over-the-counter market is not an organized security exchange.

Question 38

Mutual funds often sell directly to investors.

Question 39

A limit order may be used either to buy or to sell.

Question 40

When a brokerage house holds your securities for you,they hold them in a street name.

Question 41

A short sale transaction will be profitable when prices are falling.

Question 42

The first step in asset allocation is selecting the securities that should go into your portfolio.

Question 43

The Standard and Poor's Index includes 30 industrial stocks.

Question 44

Buying on margin would allow you to purchase securities using borrowed funds.

Question 45

A retired couple can probably bear more risk in their portfolio than a young investor with a secure job.

Question 46

A diversified portfolio should be less risky than putting your money into a single security.

Question 47

A portfolio is a collection of investment assets assembled to meet your investment objectives.

Question 48

The Federal Reserve Board (Fed)has the power to raise and lower the margin requirements for stock purchases.

Question 49

An annual stockholder report will contain audited financial statements of the company.

Question 50

Trading on margin can magnify losses or profits.

Question 51

The Securities and Exchange Commission sets margin requirements on security purchases.

Question 52

There is a trade-off between earning a high current income from an investment and obtaining significant capital appreciation from it.

Question 53

Diversification increases risk.

Question 54

On-line trading is the only valuable investment service available through the Internet.

Question 55

The most popular average/index covering stocks listed on the New York Stock Exchange is the New York Stock Exchange Index.

Question 56

Stockbrokerage firms often do industry analysis.

Question 57

A corporation's annual stockholders' report provides financial data and other information related to both past and planned activities.

Question 58

Once one's asset allocation plan is developed and securities are selected,these decisions do not have to be made again until there is a major life change.

Question 59

The NYSE index includes all stocks listed on the "Big Board."

Question 60

The federal margin requirement for common stock is 50%.

Question 61

Which of the following is not a securities market

A) capital market
B) money market
C) primary market
D) secondary market
E) Dow Jones market

Question 62

The most important investment prerequisites are

A) adequate income and savings.
B) adequate income and insurance.
C) adequate insurance and liquidity.
D) an investment plan and professional advice.
E) consistency and risk awareness.

Question 63

Exchange traded notes face both market risk and the risk of the issuing bank defaulting.

Question 64

A portfolio is a collection of investment vehicles assembled to meet an investment goal.

Question 65

____ is a short-term investment activity.

A) Buying life insurance
B) Buying bonds
C) Investing in common stock
D) Speculating in common stock
E) Saving

Question 66

Which of the following is least likely to be an investment objective?

A) enhance current income
B) save for a major purchase
C) pay monthly bills
D) accumulate funds for retirement
E) seek shelter from taxes

Question 67

Which of the following types of brokers is most likely to involve an investor trading electronically from his or her personal computer?

A) Full service broker
B) Bank broker
C) Futures broker
D) Online broker
E) Market maker

Question 68

During a bull market

A) prices go up
B) prices go down
C) prices remain stable
D) investments are pessimistic
E) cattle futures perform well

Question 69

Portfolio rebalancing refers to buying and selling activities intended to return a portfolio to its target allocation levels.

Question 70

In terms of market capitalization,Apple is the biggest company in the world.

Question 71

The most common reason given for investing is

A) enhancing current income.
B) saving for retirement.
C) sheltering earnings from taxes.
D) paying for an expensive vacation.
E) saving for college education.

Question 72

The Securities Investor Protection Corporation insures brokerage firm accounts up to

A) $500,000 per account and $250,000 in cash
B) $250,000 per account and $100,000 in cash
C) $1,000,000 per account and $500,000 in cash
D) $500,000 per account and $250,000 in cash
E) $500,000 per account and $100,000 in cash

Question 73

Which of the following is a characteristic of an organized securities exchange?

A) they facilitate trading unlisted securities
B) municipal bonds are primarily traded in organized exchanges
C) pink sheets are commonly used in these markets
D) the NASDAQ is an example of an organized exchange
E) trading in securities is carried out in a physical location

Question 74

Retired people often choose investments offering high current income with high risk.

Question 75

NYSE Euronext is a part of the broker market accounting for 40% percent of global transactions.

Question 76

The total return of a portfolio is influenced far more by specific security selection than asset allocation.

Question 77

During a bear market,security prices generally

A) hold value
B) rapidly increase in value
C) remain neutral
D) decline in value
E) consolidate in value

Question 78

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 included several reforms aimed at reforming banks and insurance companies.

Question 79

The single most important reason for investing is for retirement.

Question 80

Which of the following securities/investment acts regulates the sale of mutual fund shares?

A) The Securities Act of 1933
B) the Securities and Exchange Act of 1934
C) The Investment Company Act of 1940
D) The Sarbanes/Oxley Act of 2002
E) The Securities and Protection Act of 1970