Deck 3: Investment Information and Securities Transactions

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

A listing of a firm's major product lines and projections of future sales would both be considered descriptive information.

Question 5

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

Question 6

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

Question 7

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

Question 8

Which one of the following can be considered a pitfall for investors new to on-line trading?

A)On-line trading is fast and efficient.
B)On-line investors tend to trade too 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 9

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

Question 10

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 11

What are some of the tools available to investors on the internet (name at least 4)?

Question 12

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

Question 13

Investing online is usually less expensive than traditional methods.

Question 14

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 15

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

Question 16

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 17

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

Question 18

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

Question 19

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

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

Which of the following is usually available on a companies website?

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

Question 22

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 23

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 24

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 25

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

Question 26

MSN Money, 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 27

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 28

Which one of the following services provides bond ratings?

A)Standard & Poor's
B)Yahoo Finance
C)Value Line
D)Bureau of the Public Debt Online

Question 29

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 30

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 31

Assume you wanted to find the most current price for Home Depot's stock.Your most likely source would be

A)Yahoo Finance.
B)Investor's Business Daily.
C)The Granville Market Letter.
D)The Wall Street Journal.

Question 32

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

Question 33

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 34

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 35

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 36

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 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

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 39

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 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 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 42

Assume that the S&P 500 composite stock index closes at 2,000.This means that

A)the average stock in the index is selling for $20.00.
B)an investor would have to pay $2,000 to purchase one share of each of the stocks represented in the index.
C)The average value of a company reflected in the Index has doubled from when the Index was at 1000.
D)the share prices of the stocks in the index have risen 20 times since the 1941-1943 base period.

Question 43

Both General Electric and Goldman Sachs are part of the Dow-Jones Industrial Average.If on a given day Goldman Sachs closes at $175 and General Electric at $25

A)the difference in price will not affect the Average.
B)the Average will include 7 shares of General Electric for each share of Goldman Sachs.
C)the effect of each stock on the Average cannot be determined without knowing the number of shares outstanding for each company.
D)the effect of changes in the price of Goldman Sachs shares will have 7 times the effect on the Average as changes in the price of General Electric.

Question 44

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 45

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 46

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

Question 47

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 48

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 49

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 50

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 51

Which one of the following indexes reflects a large sample of small, medium sized and large companies?

A)NYSE composite
B)DJIA
C)Russell 3000
D)Value Line composite

Question 52

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 53

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 54

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 55

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 a divisor that adjusts for stock splits and scales the Index figure to a manageable size.

Question 56

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 57

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 58

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 59

In addition to the Dow Jones Industrial Average, the Standard & Poors 500 and NASDAQ indexes are widely quoted measures of market performance.

Question 60

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 61

Which of the following services would not be available through premium discount brokerages?

A)fast execution of trades
B)lower commissions on most trades
C)phone conversations and advice from a broker
D)the ability to place limit and stop-loss orders

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 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 64

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 65

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 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

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

Question 68

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 69

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 70

The Dow Jones Corporate Bond Indexes is based

A)the yield to maturity of bonds in the index.
B)annual rates of return and assume the bonds were purchased one year ago and sold today.
C)the interest rates offered on a sample of newly issued bonds.
D)the closing prices of bonds in the index.

Question 71

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

Question 72

When deciding between a discount or full service brokerage, the investor should consider

A)trading costs.
B)her comfort level making unassisted investment decisions.
C)her awareness of potential investment opportunities.
D)all of the above.

Question 73

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

Question 74

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

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

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

Question 77

Regulation FD requires that brokerage firms disclose material information such as earnings forecasts with all clients simultaneously.

Question 78

Why are market averages and indexes useful to investors?

Question 79

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 80

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.