Deck 3: Investment Information and Securities Transactions

Question 1

A "pump and dump" scheme involves buying shares of stock, hyping that stock via the Internet and then quickly selling the shares at a profit.

Answer 1

True

Question 2

The Internet provides
I)educational sites for financial investing.
II)the ability to trade securities on-line.
III)current information on stocks and bonds.
IV)analysts reports on individual stocks.

A) II and III only
B) III and IV only
C) I, II and III only
D) I, II, III and IV

Answer 2

D

Question 3

Individuals can use the Internet to
I)analyze individual securities.
II)search for stocks that meet specific investment criteria.
III)organize their financial information.
IV)track the performance of their portfolio.

A) I and IV only
B) II and III only
C) I, III and IV only
D) I, II, III and IV

Answer 3

D

Question 4

Investing online is usually less expensive than traditional methods.

Question 5

Charting is the technique of

A) plotting the performance of a security over time.
B) sorting through databases of securities to select one based on certain parameters.
C) monitoring a stock based on the underlying economic conditions.
D) determining the amount of money that must be saved based on a given financial goal.

Question 6

Descriptive information might include estimates of future demand for a company's products and future stock prices.

Question 7

Most brokers charge higher commissions for on-line trades than for telephone transactions.

Question 8

What is the advantage of charting the price of a security over a period of time?

Question 9

Which one of the following can be considered a negative aspect of on-line investing?

A) On-line trading is fast and efficient.
B) On-line investors tend to trade more frequently.
C) On-line trading is available to the average investor.
D) On-line investors pay lower costs per trade than investors using a broker.

Question 10

Chemical Week and the Oil and Gas Journal are considered to be general business periodicals.

Question 11

Current price information on shares of a company's stock is often accompanied by statistics on the recent price behavior of that stock.

Question 12

Which one of the following is NOT published by the US Government?

A) Federal Reserve Bulletin
B) Survey of Current Business
C) Kiplinger Washington Letter
D) Economic Report of the President

Question 13

An individual can sort stocks by dividend rates, growth rates, and price/earnings ratios using screening tools on the Internet.

Question 14

Investors can usually find the financial statement of a firm on the firm's website.

Question 15

Analytical information would include such information as estimates of growth in sales and future earnings.

Question 16

Which one of the following is considered a financial rather than a general newspaper?

A) The New York Times
B) USA Today
C) The Wall Street Journal
D) The Washingtom Post

Question 17

Reviewing industry and company information may provide guidance on the future outlook of a particular firm.

Question 18

Investors who are aware of current economic, political, and market events tend to make better investment decisions.

Question 19

You can utilize the Internet to develop financial plans and goals, analyze and select individual investments and organize your portfolio.

Question 20

Information that can be found on the internet at no cost includes
I)P/E ratios.
II)recent news about a company.
III)financial statements.
IV)future earnings and stock prices.

A) I and IV only
B) II and III only
C) I, II and III only
D) I, II, III and IV

Question 21

Subscription letters are

A) sometimes geared to specific industries and companies.
B) available free on the Internet.
C) published on an annual basis.
D) descriptive in nature but do not offer investment advice.

Question 22

Which of the following sites is especially valuable for information concerning international investments?

A) http://yahoo.finance.com
B) www.adr.com
C) www.moody's.com
D) www.bondsonline.com

Question 23

Regulation FD requires simultaneous disclosure of critical information simultaneously to investment professionals and the general public with the exception of

A) newspapers in the state where the firm is incorporated.
B) hedge funds.
C) securities rating service such as Moody's Investor Services and Standard & Poor's.
D) the company's investment bankers.

Question 24

The published analysis and recommendations of an individual brokerage firm is called a

A) prospectus.
B) comparative data source.
C) back-office research report.
D) broker's subscription report.

Question 25

Stock market averages and indexes are commonly used to measure the

A) specific behavior of companies.
B) general behavior of stock prices.
C) specific behavior of alternative investments.
D) specific behavior of the economy.

Question 26

The Standard & Poor's indexes are all based on market values which consider the number of shares outstanding.

Question 27

Averages and indexes differ from one another in that an index

A) is the arithmetic average price behavior of a group of stocks at a given point in time.
B) measures the current price behavior of a group of stocks in relation to a base value set at an earlier point in time.
C) is of value in-and-of itself, whereas an average must be compared to a historical figure to have any meaning.
D) always moves up before a corresponding average moves up, and always moves down before a corresponding average moves down.

Question 28

Which one of the following web sites does NOT offer bond ratings?

A) Standard & Poor's
B) Fitch
C) Mergent's Manuals
D) Financial Times

Question 29

In addition to the Dow Jones Industrial Average, there are Dow Jones Averages for Africa, the Americas, Asia, and Europe.

Question 30

Which of the following is published yearly by publicly-held corporations and provided free to their stockholders and other investors?

A) brokerage reports
B) annual reports
C) back-office reports
D) red herrings

Question 31

Which one of the following statements about back-office research reports is FALSE?

A) They frequently include buy or sell recommendations.
B) They include analyses of current and future prospects for the securities markets.
C) They look at specific companies as well as industries.
D) They are only available to high-profile clients who maintain large accounts with the brokerage firm.

Question 32

An index measures the current value of a group of stocks in relation to a base value established previously.

Question 33

America Online, Yahoo! Finance and the Motley Fool are all classified as

A) subscription services.
B) comparative data sources.
C) financial portals.
D) institutional news sites.

Question 34

Stock market averages reflect the arithmetic average price behavior of a group of stocks

A) at a given point in time.
B) relative to a base value set at an earlier point in time.
C) relative to other indexes.
D) relative to a base price of 100.

Question 35

Both the Dow Jones Industrial Average and the Standard and Poors 500 Index are constructed to reflect the value of shares in large, mid-size and smaller companies.

Question 36

Assume you wanted to find yesterday's closing stock price for the XYZ Corporation.You would be most likely to find this information in

A) Kiplinger's Personal Finance Magazine.
B) The Investor's Resource Manual.
C) The Granville Market Letter.
D) The Wall Street Journal.

Question 37

The Value Line Investment Survey includes which of the following reports?
I)Selection and Opinion
II)The Outlook
III)Ratings and Reports
IV)Summary and Index

A) I and II only
B) I, II and IV only
C) I, III, and IV only
D) II, III and IV only

Question 38

Standard and Poors and Mergent both publish extensive data on bonds.

Question 39

Which one of the following web sites should you utilize to review the financial information in a company's 10-K report?

A) freeedgar.com
B) valueline.com
C) wsj.com
D) finance.yahoo.com

Question 40

Current price information is found in which of the following?
I)Dow Theory Letters
II)CNN Headline News
III)CNBC TV website
IV)Hulbert Financial Digest

A) II and III only
B) I, II and III only
C) II, III and IV only
D) I, II, III and IV

Question 41

Which one of the following indexes is the most comprehensive measure of financial market performance?

A) NYSE composite
B) DJIA
C) Wilshire 5000
D) Value Line composite

Question 42

Shares of stock owned by an individual but held in a brokerage firm's name for ease of trading are said to be held in street name.

Question 43

The Dow Jones Industrial Average and the Standard & Poor's Industrial Index have a number of similarities and differences.Discuss at least two major similarities and major differences between these two market indicators.

Question 44

Earnings on securities held in street name by the brokerage are not reported to the Internal Revenue Service.

Question 45

EAFE stands for

A) Europe, Asia, Far East.
B) Europe, Australia, Far East.
C) England, America, Far East.
D) England, America, France, European Community.

Question 46

Brokerage firms are not allowed to make specific buy or sell recommendations to their clients.

Question 47

Which one of the following statements about stockbrokers is correct?

A) Stockbrokers act as dealers in the securities they trade.
B) Stockbrokers must be licensed by the Securities and Exchange Commission.
C) Stockbrokers are regulated by financial consultants.
D) Stockbrokers execute trades on the floor of the New York Stock Exchange on behalf of account executives.

Question 48

Which one of the following statements is correct?

A) The DJIA is comprised of 50 stocks.
B) The Dow Jones 65 Stocks Composite Average is comprised solely of technology stocks.
C) The Dow Jones U.S. Total Market Index is a market-weighted index.
D) The Dow Jones Transportation Average is based solely on freight line stocks.

Question 49

The basic function of stockbrokers is to execute client orders at the best possible price.

Question 50

Bond yields are

A) quoted as the average monthly rate of return and assume the bond is purchased today at the quoted price and held for twelve months.
B) quoted as annual rates of return and assume the bond is purchased today at the stated price and sold one year from today.
C) stated as a percentage of the maturity value and assume the bond is held to maturity.
D) stated as an annual rate of return and assume the bond is purchased today and held until maturity.

Question 51

Which one of the following statements is true concerning bonds?

A) A bond yield represents only the interest earned on a bond.
B) Bond yield data is more useful to an investor when compared over time.
C) A bond's yield remains constant even when a bond is sold prior to maturity.
D) Bonds with similar characteristics generally have widely disparate bond yields.

Question 52

Trading stocks is much faster and less complicated if an individual investor has possession of the actual stock certificates.

Question 53

Which of the following indexes would best reflect the performance of a large, diversified portfolio with equal amounts of money invested in each company.

A) The Dow Jones Industrial Average
B) The Russell 3000
C) The NASDAQ 100
D) The Value Line Composite Index

Question 54

What does it mean to say a bond has a yield to maturity of 6%?

Question 55

Which of the following statements about the Dow Jones Industrial Average are correct?
I)Higher-priced stocks tend to affect the average more than lower-priced stocks.
II)A one-point change in the DJIA correlates to a $1 change in average share value.
III)Changes in the DJIA are made to reflect company mergers and acquisitions.
IV)The DJIA divisor was determined when the average was created and remains constant.

A) I and III only
B) II and IV only
C) I, III and IV only
D) I, II, III and IV

Question 56

The value of a Standard & Poor's Index is computed by

A) dividing the sum of the closing share prices by an adjusted divisor.
B) dividing the sum of the closing share prices by a divisor and then multiplying the quotient by 100.
C) dividing the sum of the current market value of all the stocks in the index by the market value of the stocks in the base period and then multiplying the quotient by 100.
D) dividing the sum of the current market value of all the stocks in the index by the market value of the stocks in the base period and then multiplying the quotient by 10.

Question 57

The Dow Jones Industrial Average (DJIA)consists of 30 stocks whose price behavior

A) typically has little correlation with the rest of the stock market.
B) broadly reflects the overall price behavior of the stock market.
C) reflects the changes in value of manufacturing stocks only.
D) leads the movements in the general economy by one to two weeks.

Question 58

Assume that the S&P 500 composite stock index is 995.50.This means that

A) the average stock in the index is selling for $99.55.
B) an investor would have to pay $995.50 to purchase one share of each of the stocks represented in the index.
C) the market values of the stocks in the index increased by a factor of 99.55 since the 1941-1943 base period.
D) the share prices of the stocks in the index have risen 995.50 times since 1941.

Question 59

Which one of the following is a measure of the performance of small companies?

A) Russell 2000
B) Russell 1000
C) Russell 3000
D) Value Line 1700

Question 60

Over-the-counter market activity is reflected in the

A) Standard & Poor's composite index.
B) Nasdaq index.
C) AMEX composite index.
D) financials index.

Question 61

When placing an order on-line, an individual investor should always double check the ticker symbol prior to submitting the order.

Question 62

Which one of the following is the LEAST important when selecting a stockbroker?

A) knowing the stockbroker personally
B) selecting a stockbroker who best understands your investment goals
C) considering the services offered and the related costs
D) getting referrals from personal acquaintances with similar investment objectives

Question 63

A limit order is an order to buy or sell at the limit price or less.

Question 64

Placing your trades with a discount broker can save you as much as 80% of the commission charged by a full-service broker.

Question 65

Most brokerage firms will invest surplus cash, dividends and interest received, proceeds from the sale of stock and the like in

A) additional securities of the same type.
B) certificates of deposit.
C) a non-interest bearing account.
D) a money market mutual fund.

Question 66

If the market moves rapidly, an on-line trader may experience difficulty placing a trade.

Question 67

Traders who hold stocks for less than a full day can reduce the tax burden on their profits.

Question 68

Most on-line brokers execute their own trades on the floor of the New York Stock Exchange.

Question 69

A report describing the transactions in an account, listing the dividend and interest payments received, and detailing the current holdings is called a

A) prospectus.
B) red herring.
C) statement.
D) street certificate.

Question 70

Commission structures vary with the type of security being traded, the type of broker involved and the size of the order.

Question 71

Which one of the following statements concerning stock trades is correct?

A) Brokerage firms send customer orders to a market maker on the floor of the NYSE.
B) Confirmation of a trade is transmitted directly from the NYSE to the customer who placed the order.
C) A broker transmits OTC orders from a customer directly to a floor broker in the OTC market.
D) Brokerage firms generally hold securities in street name so they can be transferred without the customer's signature.

Question 72

A brokerage firm which provides analyst reports, investment advice and information as well as online brokerage services is called a(n)

A) premium discount broker.
B) full-service broker.
C) basic discount broker.
D) electronic broker.

Question 73

Holding securities in street name

A) makes the trading of securities easier and more efficient for individual investors.
B) allows the brokerage firm to sell securities without the customers approval.
C) enables the brokerage firm to collect the stock dividends as compensation for their services.
D) means that the brokerage firm actually owns the securities.

Question 74

Many day traders are also margin traders.

Question 75

Many brokerage firms require that disputes between individual investors and brokers be settled through arbitration.

Question 76

It is generally a good idea to use limit orders when purchasing IPOs on-line.

Question 77

Which is the correct order of events when an individual buys a stock through a brokerage firm?
I)The order is transmitted to the main office of the brokerage firm.
II)The customer places the order with their local stockbroker.
III)The confirmation of the order is sent to the broker placing the order.
IV)The order is sent to the floor of the exchange.

A) I, II, III, IV
B) II, I, III, IV
C) II, IV, I, III
D) II, I, IV, III

Question 78

A stop-loss order is activated once the stock reaches the specified price.

Question 79

Investors are protected from market losses by the SIPC insurance offered by some full-service brokers.

Question 80

Small investors normally have a negotiated commission schedule while large investors benefit from a fixed-commission schedule.