Question 1

During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.

Accepted Answer

A) True 
 B)False

Question 2

An investor concerned with a predictable source of income provided by an investment would choose

Accepted Answer

A)   options.
B)   commodities.
C)   government bonds.
D)   common stocks.
E)   speculative investments.

Question 3

Earnings that are reinvested in a corporation are called

Accepted Answer

A)   retained earnings.
B)   surplus earnings.
C)   retention capital.
D)   additional capital.
E)   collected capital.

Question 4

Which of the following is not a true statement?

Accepted Answer

A)   When choosing an investment, it is not necessary to consider the risk factor.
B)   During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.
C)   The interest rate risk associated with investments in bonds is the result of changes in the interest rates in the economy.
D)   The risk of business failure is associated with investments in common stock, preferred stock, and corporate bonds.
E)   The price of stocks, bonds, and other investments may fluctuate because of the behavior of investors in the marketplace.

Question 5

Which of the following investments offers the greatest liquidity?

Accepted Answer

A)   collectibles
B)   common stock
C)   corporate bonds
D)   real estate
E)   bank accounts

Question 6

The ease with which an investment can be converted to cash without a substantial loss in dollar value is called the

Accepted Answer

A)   asset value.
B)   liquidity factor.
C)   immediate quotient.
D)   fixed cost factor.
E)   variable cost factor.

Question 7

The most important priority an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends.

Accepted Answer

A) True 
 B)False  True

Question 8

The fees for investor services and newsletters may range between $30 and $750 a year.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a true statement?

Accepted Answer

A)   Professional management is an especially important factor for investors purchasing a mutual fund.
B)   One of the many reasons why investors purchase mutual funds is diversification.
C)   With mutual funds, an occasional loss in one security is often offset by gains in other securities.
D)   Mutual funds are designed to appeal to conservative investors with long-term investment goals.
E)   The individual investor is responsible for choosing the right mutual fund.

Question 10

All of the following statements are considered to be good advice for the potential investor before starting his or her personal investment program except:

Accepted Answer

A)   Learn to live within your means.
B)   Increase credit purchases and make installment payments in order to increase cash available for investing.
C)   Provide adequate insurance protection.
D)   Start an emergency fund.
E)   Establish a line of credit.

Question 11

When a bondholder loses money because interest rates in the economy increase, it is an example of ____________ risk.

Accepted Answer

A)   market
B)   interest rate
C)   inflation
D)   business failure
E)   current

Question 12

Which of the following statements does not accurately describe a line of credit?

Accepted Answer

A)   A line of credit is already approved before the money is actually needed.
B)   A line of credit is a long-term loan.
C)   A line of credit can be obtained at a credit union, trust company, or bank.
D)   A line of credit provides an alternative source of funds if an emergency does develop.
E)   A line of credit is available immediately when needed.

Question 13

Choose four of the investment alternatives presented in Chapter 10 and describe how the factors of safety, risk, income, growth, and liquidity affect that investment alternative.

Accepted Answer

Obviously, the answer to this question depends on which four investment alternatives students choose. Figure 10.3 (in the text) provides a summary of each factor for all investment alternatives presented in this chapter.

Question 14

Equity capital is money

Accepted Answer

A)   obtained from the owners of the business.
B)   borrowed through banks.
C)   obtained by employee benefit programs.
D)   that has to be repaid.
E)   that has been allocated to a retirement program.

Question 15

Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a true statement?

Accepted Answer

A)   A corporation generally obtains equity capital from stockholders.
B)   A corporation can issue both preferred stock and common stock.
C)   When a corporation is experiencing financial problems, an investor should purchase common rather than preferred stock.
D)   Most corporations sell common stock to satisfy a large part of their financing needs.
E)   The most important priority a preferred stockholder enjoys is receiving cash dividends before common stockholders receive cash dividends. C

Question 17

The amount put aside as an emergency fund should be equal to 1 to 3 months of living expenses.

Accepted Answer

A) True 
 B)False

Question 18

Nationwide real estate values increase by ____________ percent a year.

Accepted Answer

A)   1
B)   3
C)   7
D)   10
E)   15

Question 19

One dollar placed in a safety deposit box in 1980 is worth

Accepted Answer

A)   less than 50 cents.
B)   about 10 cents.
C)   zero.
D)   between 50 cents and one dollar.
E)   more than one dollar.

Question 20

An intermediate-term objective is defined as one that will be accomplished within two to five years.

Accepted Answer

A) True 
 B)False

Exam 10: Fundamentals of Investing

During inflationary times, there is a risk that the financial return on an investment will not keep pace with the rate of inflation.

Correct AnswerverifiedShow Answer

An investor concerned with a predictable source of income provided by an investment would choose

Correct AnswerverifiedShow Answer

Earnings that are reinvested in a corporation are called

Correct AnswerverifiedShow Answer

Which of the following is not a true statement?

Correct AnswerverifiedShow Answer

Which of the following investments offers the greatest liquidity?

Correct AnswerverifiedShow Answer

The ease with which an investment can be converted to cash without a substantial loss in dollar value is called the

Correct AnswerverifiedShow Answer

The most important priority an investor in preferred stock enjoys is receiving cash dividends before common stockholders are paid any cash dividends.

Correct AnswerverifiedTrue

The fees for investor services and newsletters may range between $30 and $750 a year.

Correct AnswerverifiedShow Answer

Which of the following is not a true statement?

Correct AnswerverifiedShow Answer

All of the following statements are considered to be good advice for the potential investor before starting his or her personal investment program except:

Correct AnswerverifiedShow Answer

When a bondholder loses money because interest rates in the economy increase, it is an example of ____________ risk.

Correct AnswerverifiedShow Answer

Which of the following statements does not accurately describe a line of credit?

Correct AnswerverifiedShow Answer

Choose four of the investment alternatives presented in Chapter 10 and describe how the factors of safety, risk, income, growth, and liquidity affect that investment alternative.

Correct AnswerverifiedObviously, the answer to this question depends on which four investment alternatives students choose. Figure 10.3 (in the text) provides a summary of each factor for all investment alternatives presented in this chapter.

Equity capital is money

Correct AnswerverifiedShow Answer

Liquidity is the ease with which an asset can be converted to cash without a substantial loss in dollar value.

Correct AnswerverifiedShow Answer

Which of the following is not a true statement?

Correct AnswerverifiedC

The amount put aside as an emergency fund should be equal to 1 to 3 months of living expenses.

Correct AnswerverifiedShow Answer

Nationwide real estate values increase by ____________ percent a year.

Correct AnswerverifiedShow Answer

One dollar placed in a safety deposit box in 1980 is worth

Correct AnswerverifiedShow Answer

An intermediate-term objective is defined as one that will be accomplished within two to five years.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Obviously, the answer to this question depends on which four investment alternatives students choose. Figure 10.3 (in the text) provides a summary of each factor for all investment alternatives presented in this chapter.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified