Question 1

Which of the following steps is NOT a factor to be considered before making your first investment?

Accepted Answer

A)   Work to balance your budget.
B)   Manage your credit card debt.
C)   Have access to other sources of cash for emergency needs.
D)   Save at least $10,000 to invest.
E)   Start an emergency fund.

Question 2

Safe investments include all of the following except

Accepted Answer

A)   Government bonds.
B)   Savings accounts.
C)   Certificates of deposit.
D)   Certain corporate bonds.
E)   Commodities.

Question 3

Corporations use bonds

Accepted Answer

A)   For financing ongoing business activities.
B)   When it is difficult to sell stock.
C)   To improve financial leverage.
D)   All of these are correct.
E)   None of these is correct.

Question 4

According to some financial experts like Suze Orman, how much of an investment program should a 50-year-old invest in safe (nongrowth)  investments?

Accepted Answer

A)   30%
B)   40%
C)   50%
D)   60%
E)   70%

Question 5

While all cardholders have reasons for using their credit cards, it is very difficult to get in trouble by using your credit cards.

Accepted Answer

A) True 
 B)False

Question 6

Assume that you purchase a $1,000 bond issued by Kohls that pays 8% interest each year, paid every 6 months. What is the amount of each interest payment?

Accepted Answer

A)   $4.00
B)   $8.00
C)   $40.00
D)   $80.00
E)   $1,000

Question 7

Bond ratings range from AAA (the highest) to D (the lowest) for Standard & Poor's Corporation.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not correct?

Accepted Answer

A)   The taxable equivalent yield is greater than the tax-exempt yield.
B)   The taxable equivalent yield can be compared to the return on a taxable investment.
C)   An investor can have a capital gain if she sells a municipal bond before maturity.
D)   The taxable equivalent yield is calculated for municipal securities.
E)   The tax-exempt yield is associated primarily with federal government securities.

Question 9

The taxable equivalent yield for a municipal bond is calculated using the

Accepted Answer

A)   Investor's tax rate and Treasury bill yield.
B)   Tax-exempt yield and current inflation rate.
C)   Tax-exempt yield and the investor's tax rate.
D)   Current inflation rate and number of years until maturity.
E)   Tax-exempt yield and number of years until maturity.

Question 10

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n)  ____________ bond.

Accepted Answer

A)   debenture
B)   mortgage
C)   indenture
D)   convertible
E)   subordinated

Question 11

Which of the following describes a growth company?

Accepted Answer

A)   The company pays a large dividend.
B)   Profits are reinvested in the company for future growth.
C)   Sales revenues are not increasing.
D)   The company has managers who cannot solve the problems associated with rapid expansion.
E)   The company is considered a conservative company for investors.

Question 12

An example of an investment with high risk is a government bond.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following investments is the most liquid?

Accepted Answer

A)   Certificate of deposit
B)   Corporate bond
C)   Interest-bearing checking account
D)   Municipal bond
E)   Preferred stock

Question 14

Gwendolyn Francis is interested in buying a bond that pays $70 annually. The current price of the bond is $800. What is her current yield?

Accepted Answer

A)   3.5%
B)   4%
C)   7%
D)   8%
E)   8.75%

Question 15

Which of the following features is a benefit for investors of municipal bonds?

Accepted Answer

A)   Interest may be tax-exempt at the federal level.
B)   Interest may be tax-deductible at the federal level.
C)   The face value may be tax-deductible at the state level.
D)   The face value may be a tax credit at the federal level.
E)   All payments are tax-deductible at all governmental levels.

Question 16

Bonds of a single issue that mature on different dates are called ____________ bonds.

Accepted Answer

A)   debenture
B)   mortgage
C)   sinking fund
D)   subordinate
E)   serial

Question 17

If a bond is quoted in the newspaper at 105, what is its price?

Accepted Answer

A)   $1.05
B)   $10.50
C)   $105.00
D)   $1,000
E)   $1,050

Question 18

Which of the following is not one of the four components of the risk factor to be considered when evaluating investments?

Accepted Answer

A)   Business failure risk
B)   Inflation risk
C)   Interest rate risk
D)   Market risk
E)   Stock risk

Question 19

Investors pick investments that have less risk, because they know there is a moderate chance that these investments will become worthless.

Accepted Answer

A) True 
 B)False

Question 20

When investing, in your role as an investor you should not

Accepted Answer

A)   Evaluate potential investments.
B)   Let the investments manage themselves.
C)   Monitor the value of investments.
D)   Keep accurate records.
E)   Consider tax consequences of selling investments.

Exam 11: Investing Fundamentals and Bonds

A bond that can be exchanged, at the owner's option, for a specified number of shares of the corporation's stock is called a(n) ____________ bond.

Correct AnswerverifiedShow Answer

Which of the following is not correct?

Correct AnswerverifiedShow Answer

Bond ratings range from AAA (the highest) to D (the lowest) for Standard & Poor's Corporation.

Correct AnswerverifiedShow Answer

Bonds of a single issue that mature on different dates are called ____________ bonds.

Correct AnswerverifiedShow Answer

Gwendolyn Francis is interested in buying a bond that pays $70 annually. The current price of the bond is $800. What is her current yield?

Correct AnswerverifiedShow Answer

When investing, in your role as an investor you should not

Correct AnswerverifiedShow Answer

Assume that you purchase a $1,000 bond issued by Kohls that pays 8% interest each year, paid every 6 months. What is the amount of each interest payment?

Correct AnswerverifiedShow Answer

Which of the following steps is NOT a factor to be considered before making your first investment?

Correct AnswerverifiedShow Answer

Which of the following describes a growth company?

Correct AnswerverifiedShow Answer

While all cardholders have reasons for using their credit cards, it is very difficult to get in trouble by using your credit cards.

Correct AnswerverifiedShow Answer

Which of the following is not one of the four components of the risk factor to be considered when evaluating investments?

Correct AnswerverifiedShow Answer

Which of the following features is a benefit for investors of municipal bonds?

Correct AnswerverifiedShow Answer

Investors pick investments that have less risk, because they know there is a moderate chance that these investments will become worthless.

Correct AnswerverifiedShow Answer

Which of the following investments is the most liquid?

Correct AnswerverifiedShow Answer

Safe investments include all of the following except

Correct AnswerverifiedShow Answer

Corporations use bonds

Correct AnswerverifiedShow Answer

According to some financial experts like Suze Orman, how much of an investment program should a 50-year-old invest in safe (nongrowth) investments?

Correct AnswerverifiedShow Answer

If a bond is quoted in the newspaper at 105, what is its price?

Correct AnswerverifiedShow Answer

The taxable equivalent yield for a municipal bond is calculated using the

Correct AnswerverifiedShow Answer

An example of an investment with high risk is a government bond.

Correct AnswerverifiedShow Answer

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