Question 1

Barker Creek Clothing has after-tax income of $6.4 million and its earnings per share are $0.20.How many shares of stock does it have outstanding?

Accepted Answer

A) 2 million 
B) 3.1 million 
C) 12.8 million 
D) 32 million 
E) 40 million

Question 2

A yield calculation that takes into account the total return,the original investment,and the number of years that the investment is held is called ________ yield.

Accepted Answer

A) current 
B) dividend 
C) annualized holding period 
D) capital gain 
E) original investment

Question 3

Arnell Johnson bought 200 shares of Black Petroleum Company for $100 per share and paid a commission of $50.He sold the stock five years later for $125 per share and paid $65 commission.While he held the stock,it paid a dividend of $4.00 per share.What was Arnell's total dollar return on this stock?

Accepted Answer

A) $24,900 
B) $20,000 
C) $5,800 
D) $5,700 
E) $5,685

Question 4

A stock issued by a corporation that has a market capitalization of $300 million or less would be classified as what type of stock?

Accepted Answer

A) Micro cap 
B) Penny stock 
C) Midcap 
D) Small cap 
E) Blue chip

Question 5

Why do corporations issue common stock? Why do investors buy that stock?

Accepted Answer

The answer of Why do corporations issue common stock? Why...

Question 6

To calculate dividend yield,the annual dividend amount per share is divided by the ________ per share.

Accepted Answer

A) current stock price 
B) stock's original issue value 
C) current earnings 
D) current book value 
E) current sales revenue

Question 7

Which of the following is true regarding book value?

Accepted Answer

A) A direct correlation exists between the market value and book value of a stock. 
B) Book value calculations may be misleading to investors. 
C) Book value is seldom reported in financial publications. 
D) Book value is never used to calculate market-to-book ratio. 
E) Some investors believe a stock is a bargain when the stock's market value is above its book value.

Question 8

If the corporation has a bad year,the board of directors generally may vote to:

Accepted Answer

A) sell less stock. 
B) decrease the stock price. 
C) cease selling stock. 
D) omit dividend payments. 
E) increase dividend payments.

Question 9

Stocks issued by large corporations in mature industries often have high P-E ratios.

Accepted Answer

A) True 
 B)False

Question 10

The minimum commission charged by most brokerage firms for buying or selling stock is between $5 and $25.

Accepted Answer

A) True 
 B)False

Question 11

To finance their business activities,many corporations prefer selling common stock because:

Accepted Answer

A) it does not have to be repaid until 10 to 15 years after it has been issued. 
B) interest payments to stockholders are lower than interest paid to a bank. 
C) common shareholders have no voting rights. 
D) interest paid to stockholders is tax deductible. 
E) the money obtained from stockholders does not have to be repaid.

Question 12

When a stock splits two-for-one,you should expect the price per share to:

Accepted Answer

A) decrease to half its pre-split price. 
B) decrease in value by 75 percent or more. 
C) remain unchanged. 
D) increase to more than twice its pre-split price. 
E) increase to twice its pre-split price.

Question 13

Sean Rouse owns shares of common stock in Stowaway Transportation Company.The company is getting ready to pay a dividend.Sean knows he must be registered on the corporation's books on the ________ date in order to receive the dividend.

Accepted Answer

A) record 
B) ex-dividend 
C) payment date 
D) ex-payment 
E) stockholders' meeting

Question 14

A stock issued by a company that has a market capitalization of between $300 million and $2 billion is called a ________ stock.

Accepted Answer

A) defensive 
B) cyclical 
C) growth 
D) small cap 
E) blue chip

Question 15

Assume that you purchased 100 shares of a stock for $50 a share,that you received an annual dividend of $2.50 a share,and that you sold your stock for $60 a share at the end of one year.What is the total return on your investment?

Accepted Answer

A) $200 
B) $1,000 
C) $1,250 
D) $1,500 
E) $2,200

Question 16

Mellon Manufacturing has after-tax income of $6 million.It also has 4 million shares of stock outstanding.What is the corporation's earnings per share?

Accepted Answer

A) $3.00 
B) $2.00 
C) $1.50 
D) $0.67 
E) $0.75

Question 17

Lindsey Holt owns stock in the Galloway Gems Company.She knows in advance that the dividend on this stock is a $1.50 per share.Given this,you know for sure that she purchased which type of stock?

Accepted Answer

A) Preferred 
B) Common 
C) Blue chip 
D) Growth 
E) Penny

Question 18

One of the oldest and most recognized measures of stock market activity is:

Accepted Answer

A) Morningstar 
B) Reuters 
C) Dow Jones Industrial Average 
D) Market Watch 
E) Value Line

Question 19

A stock issued by a corporation that has a market capitalization of between $2 and $10 billion is called a ________ stock.

Accepted Answer

A) defensive 
B) midcap 
C) growth 
D) income 
E) blue chip

Question 20

The dividend yield for a stock investment is calculated by dividing:

Accepted Answer

A) the annual dividend amount per share by the investment's past price per share. 
B) the annual dividend amount per share by the investment's current price per share. 
C) the annual dividend amount per share by the investment's future price per share. 
D) the investment's past price per share by the annual dividend amount per share. 
E) the investment's current price per share by the annual dividend amount per share.

Exam 14: Investing in Stocks