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Exam 12: Investing in Stocks and Bonds

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Question 41

Multiple Choice

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The business risk faced by an investor when investing in a company is related to:

A) changes in the economy.
B) investor behavior in the market.
C) the book value of a firm's assets.
D) the firm's ability to meet operating expenses in a timely manner.
E) security price fluctuations.

F) A) and B)
G) A) and E)

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Question 42

Multiple Choice

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A _____ is a type of municipal bond that is backed by the full faith and credit of the municipality.

A) debenture
B) general obligation bond
C) revenue bond
D) zero coupon bond
E) equipment trust certificate

F) A) and E)
G) None of the above

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Question 43

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INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Municipal bonds are exempt from [ federal income tax | capital gains tax ].

Return on equity (ROE) is calculated by:

When a bond is sold between coupon payment dates, the buyer pays the seller for the _____, which is the prorated share of the upcoming coupon payment.

The market price per share of Zinc Corporation is $145, and earnings per share (EPS) is $20. What is the price/earnings (P/E) ratio of Zinc Corporation?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. [ Raising | Lowering ] a bond rating will result in higher current yields.

The Smith family owns 200 shares of Elta stock. The company declared a 5% stock dividend. The Smiths now own:

Tech stocks often fall into either the growth stock category or the speculative stock class.

Suppose the earnings per share (EPS) of a stock is $2, and the current price/earnings (P/E) ratio is 10. What is the current price of the stock?

Which of the following bond ratings would be for junk bonds?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. In periods of inflation, the purchasing power of the dollar [ rises | declines ].

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

The approximate expected return measure for determining the expected return on an investment does not include interest on interest.

The easiest way to invest in foreign markets is through:

Which of the following statements about risk is true?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. Annual interest income divided by the market price of the bond equals [ current yield | yield to maturity ].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. Select A for the first item, B for the second item, and C if neither item will correctly complete the statement. A debenture is an example of a [ junior | senior ] bond.

A callable bond allows the issuer to retire the security prior to maturity.

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