Question 1

The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its:

Accepted Answer

A)  par value.
B)  clean price.
C)  negotiated price.
D)  dirty price.
E)  discount price.F) C) and D)
G) A) and D)

Question 2

Earnings per share indicates to the stockholders the amount of dividends earned.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following accounting measures indicates the amount of stockholder funds used to finance the firm?

Accepted Answer

A)  Book value
B)  Actual rate of return
C)  Net profit margin
D)  Approximate yield
E)  Price\earnings ratioF) A) and E)
G) B) and D)

Question 4

Bonds can earn income through interest payments and capital gains.

Accepted Answer

A) True 
 B)False

Question 5

Bonds are issued:

Accepted Answer

A)  by corporations and state, local, and federal governments.
B)  only by state and local governments and partnership firms.
C)  only by corporations and partnership firms.
D)  by Moody's and Standard & Poor's.
E)  by the Securities Exchange Commission (SE
C)  .F) A) and E)
G) C) and D)

Question 6

Investors would prefer a stock with steadily increasing earnings per share and return on equity.

Accepted Answer

A) True 
 B)False

Question 7

Bonds issued by political subdivisions of the U.S. government but not obligation of the U.S. Treasury are called:

Accepted Answer

A)  federal bonds.
B)  agency bonds.
C)  Treasury bonds.
D)  municipal bonds.
E)  trust bonds.F) All of the above
G) A) and D)

Question 8

Which of the following statements regarding American Depositary Receipts (ADRs) is true?

Accepted Answer

A)  ADRs are traded only in foreign exchanges.
B)  ADRs are denominated in foreign currencies.
C)  ADRs represent a stated number of shares in a specific foreign company.
D)  The investors in ADRs receive annual interest amounts in dollars.
E)  The investors in ADRs receive dividends in foreign currencies.F) A) and C)
G) C) and E)

Question 9

Which of the following statements about risk is true?

Accepted Answer

A)  The higher the risk, the higher the expected return.
B)  The higher the risk, the lower the return.
C)  The lower the risk, the greater the maturity value of the investment.
D)  The higher the risk, the lower the maturity value of the investment.
E)  The higher the risk, the lower the risk-free rate.F) B) and E)
G) B) and C)

Question 10

Companies with a great deal of long-term debt are considered to have high _____ risk.

Accepted Answer

A)  market
B)  event
C)  business
D)  financial
E)  liquidityF) B) and C)
G) A) and E)

Question 11

The current net profit of Sigma Inc. is $8 million, the market price of the stock is $65, and sales is $50 million. The net profit margin of Sigma Inc. is:

Accepted Answer

A)  10%.
B)  28%.
C)  16%.
D)  8%.
E)  22%.F) B) and C)
G) A) and E)

Question 12

Stocks whose earnings have increased at an above-average level over time are called:

Accepted Answer

A)  cyclical stocks.
B)  growth stocks.
C)  income stocks.
D)  speculative stocks.
E)  defensive stocks.F) C) and E)
G) A) and C)

Question 13

The market price per share of Zinc Corporation is $145, and earnings per share is $20. What is the price\earnings ratio of Zinc Corporation?

Accepted Answer

A)  10.25
B)  7.25
C)  2.25
D)  12.36
E)  15.00F) A) and B)
G) B) and D)

Question 14

Changes in the general level of prices within an economy produce:

Accepted Answer

A)  business risk.
B)  financial risk.
C)  market risk.
D)  purchasing power risk.
E)  liquidity risk.F) C) and E)
G) A) and E)

Question 15

Stock profitability is often measured by:

Accepted Answer

A)  book value.
B)  return on equity.
C)  market value.
D)  net profit margin.
E)  beta.F) C) and D)
G) A) and D)

Question 16

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8%. Presently, new bonds issued with a similar creditworthiness have a 10% interest rate. Which of the following is most likely to be true about the bond?

Accepted Answer

A)  It is currently selling for a premium.
B)  It is currently selling at a discount.
C)  It is currently selling at par.
D)  It is likely to be retired.
E)  The bond's coupon rate increases.F) A) and C)
G) C) and D)

Question 17

The higher the net profit margin of a company, the more money the company earns.

Accepted Answer

A) True 
 B)False

Question 18

Low price\earnings ratios indicate high investor confidence.

Accepted Answer

A) True 
 B)False

Question 19

A bond is quoted as a 6.5% coupon. The par value of the bond is $1,000, and the market value is $1,200. The bondholder would receive _____ interest per year.

Accepted Answer

A)  $78
B)  $780
C)  $65
D)  $500
E)  $650F) A) and C)
G) A) and B)

Question 20

Common stockholders are considered to be the residual owners of a company.

Accepted Answer

A) True 
 B)False

Exam 12: Investing in Stocks and Bonds

Companies with a great deal of long-term debt are considered to have high _____ risk.

Correct AnswerverifiedShow Answer

The current net profit of Sigma Inc. is $8 million, the market price of the stock is $65, and sales is $50 million. The net profit margin of Sigma Inc. is:

Correct AnswerverifiedShow Answer

A bond was issued at a par value of $1,000 when the interest rate for similar bonds was 8%. Presently, new bonds issued with a similar creditworthiness have a 10% interest rate. Which of the following is most likely to be true about the bond?

Correct AnswerverifiedShow Answer

Stocks whose earnings have increased at an above-average level over time are called:

Correct AnswerverifiedShow Answer

The relevant sale or invoice price of a bond to the buyer, which adds the accrued interest to the quoted price, is its:

Correct AnswerverifiedShow Answer

Which of the following accounting measures indicates the amount of stockholder funds used to finance the firm?

Correct AnswerverifiedShow Answer

Bonds issued by political subdivisions of the U.S. government but not obligation of the U.S. Treasury are called:

Correct AnswerverifiedShow Answer

Changes in the general level of prices within an economy produce:

Correct AnswerverifiedShow Answer

Which of the following statements about risk is true?

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Bonds can earn income through interest payments and capital gains.

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Common stockholders are considered to be the residual owners of a company.

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Bonds are issued:

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A bond is quoted as a 6.5% coupon. The par value of the bond is $1,000, and the market value is $1,200. The bondholder would receive _____ interest per year.

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Earnings per share indicates to the stockholders the amount of dividends earned.

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The higher the net profit margin of a company, the more money the company earns.

Correct AnswerverifiedShow Answer

The market price per share of Zinc Corporation is $145, and earnings per share is $20. What is the price\earnings ratio of Zinc Corporation?

Correct AnswerverifiedShow Answer

Stock profitability is often measured by:

Correct AnswerverifiedShow Answer

Which of the following statements regarding American Depositary Receipts (ADRs) is true?

Correct AnswerverifiedShow Answer

Low price\earnings ratios indicate high investor confidence.

Correct AnswerverifiedShow Answer

Investors would prefer a stock with steadily increasing earnings per share and return on equity.

Correct AnswerverifiedShow Answer

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