Deck 3: Investment Information and Securities Transactions

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

Investing online is usually less expensive than traditional methods.

Answer 3

True

Question 4

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

Question 5

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

Question 6

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

Question 7

An investor who mistakenly buys the wrong stock because the symbols are similar has 24 hours to undo the trade.

Question 8

For most stocks, charts and tables of historical prices are only available through subscription services.

Question 9

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

Question 10

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

Question 11

The tools and calculators available on the FINRA website are useful, but quite expensive to use.

Question 12

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 13

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 14

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

Question 15

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

Question 16

Descriptive information might include the company's lines of business, a list of major competitors, and recent changes in management.

Question 17

On-line trading has greatly lowered greatly lowered the cost of buying and selling stock as well as greatly increasing the speed of transactions.

Question 18

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

Question 19

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

Question 20

Individuals can now use the Internet to buy and sell
I) stocks.
II) bonds.
III) mutual funds.
IV) stock options.

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

Question 21

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 22

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

Question 23

Which of the following sites is especially valuable for information concerning mutual funds?

A) www.investopedia.com
B) www.morningstar.com
C) www.moody's.com
D) www.bondsonline.com

Question 24

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

A) brokerage firms.
B) hedge funds.
C) securities rating service such as Moody's Investor Services and Standard & Poor's.
D) mutual fund managers.

Question 25

Which one of the following is NOT published by the U.S. Government?

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

Question 26

All the Standard & Poor's indexes are based on the total market values of the companies rather than on the price of a single share.

Question 27

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 28

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 29

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 30

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.

Question 31

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 32

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 33

Which of the following types of information will NOT be found in major urban newspapers?

A) price quotations for stocks of local interest
B) stories concerning local business leaders
C) interest rates offered by local and national banks
D) real time price quotes for widely held stocks and exchange traded funds

Question 34

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

Question 35

Current price information is found in which of the following?
I) Dow Theory Letters
II) Yahoo!Finance
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 36

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 37

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 38

Which of the following is a general rather a financial newspaper?

A) The New York Times
B) Investor's Business Daily
C) The Wall Street Journal
D) Barron's

Question 39

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 40

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 41

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 42

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

Question 43

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 S&P 500 Index
B) the Russell 3000
C) the NASDAQ 100
D) the Value Line Composite Index

Question 44

The Value Line Index is a value weighted index based on a small sample of the 1700 stocks covered by the Value Line investment reports.

Question 45

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 46

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 47

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 a divisor adjusted for changes in the companies composing the Index.
D) dividing the sum of the current market value of all the stocks in the index by 1 million.

Question 48

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 49

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 50

In addition to the Dow Jones Industrial Average, there are Dow Jones Averages for transportation and bond prices.

Question 51

Assume that the S&P 500 composite stock index closes at 1300. This means that

A) the average stock in the index is selling for $130.00.
B) an investor would have to pay $1,300 to purchase one share of each of the stocks represented in the index.
C) The average value of a company reflected in the Index is up 30% from when the Index was at 1000.
D) the share prices of the stocks in the index have risen 13 times since the 1941-1943 base period.

Question 52

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 53

Standard & Poor's and Mergent both publish extensive data on bonds.

Question 54

Which one of the following statements is correct?

A) The S&P 500 Index is based on 500 large companies that trade on U.S. exchanges.
B) Because of mergers and bankruptcies, the S&P 500 Index no longer contains 500 stocks.
C) The S&P 500 Index is carefully constructed to reflect the values of large, medium and small capitalization companies.
D) The S&P 500 is based on the 500 largest U.S. companies as measured by market value.

Question 55

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 56

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 57

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 58

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 59

The Dow Jones Industrial Average (DJIA) is based on the prices of

A) 30 stocks.
B) 100 stocks.
C) 500 stocks.
D) 200 stocks.

Question 60

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 61

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 62

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 63

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 64

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 65

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

Question 66

Unless the investor has requested another arrangement, cash from dividends and the sale of stock is normally

A) deposited in a Money Market Account offered by the brokerage.
B) automatically reinvested in more stock.
C) direct deposited to the investor's bank account.
D) held in escrow by the brokerage until it is be reinvested.

Question 67

Regulation FD requires that brokerage firms share buy and sell recommendations with all clients simultaneously.

Question 68

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 69

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 70

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 71

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

Question 72

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 73

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

Question 74

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 75

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 76

Advantages of a full-service brokerage include

A) faster execution of trades.
B) lower commissions on most trades.
C) access to advice and research reports.
D) the ability to place limit and stop-loss orders.

Question 77

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 78

Stocks held in street name can be quickly sold online or by telephone.

Question 79

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

Question 80

Why are market averages and indexes useful to investors?