Deck 11: Investment Planning

Question 1

The capital market is the marketplace for long-term securities.

Answer 1

True

Question 2

Speculating requires a fairly large some such as $5,000 to get started.

Answer 2

False

Question 3

When completed,an investment plan is a way of translating an abstract investment target into a specific investment program.

Answer 3

True

Question 4

Mutual funds provide professional management and diversification that individual investors - especially those with limited resources - can rarely obtain on their own.

Question 5

Two prerequisites to investing are above average risk and clear understanding of market direction.

Question 6

Common stock pays interest payments on a quarterly basis.

Question 7

Investing and speculating are two entirely different activities.

Question 8

A systematic investment routine involves investing similar sums in regular intervals.

Question 9

Owning common stock represents an debt investment.

Question 10

The major reason most people invest is to shelter current income from taxes.

Question 11

An investment in a financial futures contract would represent a fairly low risk investment.

Question 12

Common stock generally allows the stockholder to vote on issues of corporate governance.

Question 13

Your goals tend to set the tone for your investment program,and they play a major role in determining how conservative or aggressive you're likely to be in making investment decisions.

Question 14

Long-term securities are traded in the primary market.

Question 15

A statement specifying how investment capital will be invested in order to reach targeted goals is called a marketing plan.

Question 16

The term "investment' refers to money placed in some medium where value and level of return are totally unpredictable.

Question 17

Newly issued securities are sold to the public in the secondary market.

Question 18

Investing is considered a short-term activity that involves the buying and selling of securities.

Question 19

A prospectus describes the firm and the issue of a new security.

Question 20

An individual is more likely to use the secondary markets than the primary market.

Question 21

A round lot consists of multiples of 100 shares of stock.

Question 22

The American Stock Exchange is the nation's largest market and is located on Wall Street.

Question 23

All OTC stocks are part of NASDAQ.

Question 24

A sale of 450 shares of stock would involve the trade of an odd lot.

Question 25

If a company's shares are traded on the New York Stock Exchange,the company is a member of the exchange.

Question 26

The OTC is the largest regional exchange.

Question 27

Listed securities are traded on organized exchanges.

Question 28

The Boston Stock Exchange is a regional exchange.

Question 29

Preferred stocks are the common stocks of ultra blue-chip companies.

Question 30

The New York Stock Exchange is the largest stock exchange in the world.

Question 31

The Securities Investor Protection Corporation insurance guarantees the dollar value of your securities will not dip below a certain level.

Question 32

Mutual funds often sell directly to investors.

Question 33

In order to trade securities on the floor of an exchange,members who are doing the trading must own a "seat" on the exchange.

Question 34

Commodities markets trade options to buy and sell options to buy common stocks.

Question 35

Preferred stock combines the fixed income features of bonds with the same price appreciation potential as common stocks.

Question 36

The bid price would be the price paid by an investor for an OTC stock.

Question 37

Seats on the security exchanges are rented by stock brokerage firms.

Question 38

AMEX is the second largest organized exchange in the world.

Question 39

A retail stockbroker buys and sells securities on behalf of clients.

Question 40

The over-the-counter market is not an organized security exchange.

Question 41

There are more companies traded in the over-the-counter market than on any exchange.

Question 42

An odd lot transaction is generally more expensive than a round lot transaction.

Question 43

Regional exchanges handle most of the volume of stock trades in the United States.

Question 44

According to recent legislation,under the FDIC each brokerage account is insured up to $250,000.

Question 45

A short sale transaction will be profitable when prices are falling.

Question 46

Brokers charge a commission on security purchases as well as on security sales.

Question 47

The Securities and Exchange Commission sets margin requirements on security purchases.

Question 48

When a brokerage house holds your securities for you,they hold them in a street name.

Question 49

There are 50 shares in a round lot.

Question 50

A good 'til cancelled order is a market order.

Question 51

The federal government regulates securities markets through the Securities and Exchange Commission.

Question 52

A brokerage fee of 5 percent on a stock purchase would be a low fee.

Question 53

NASDAQ is now the second largest securities market in the U.S.

Question 54

The federal margin requirement for common stock is 50%.

Question 55

Discount brokers discount the price of securities to below the prevailing market price.

Question 56

Prices are rising in bear markets,indicating economic optimism.

Question 57

A market order to sell would be filled at the highest price available that day.

Question 58

The Federal Reserve Board (Fed)has the power to raise and lower the margin requirements for stock purchases.

Question 59

A limit order may be used either to buy or to sell.

Question 60

Buying on margin would allow you to purchase securities using borrowed funds.

Question 61

Daily security performance can be found in the Wall Street Journal and other major newspapers.

Question 62

An annual stockholder report will contain audited financial statements of the company.

Question 63

There is strong evidence that the total return on a portfolio is influenced more by its asset allocation plan than by specific security selections.

Question 64

A portfolio is a collection of investment assets assembled to meet your investment objectives.

Question 65

Trading on margin can magnify losses or profits.

Question 66

There is a trade-off between earning a high current income from an investment and obtaining significant capital appreciation from it.

Question 67

The first step in asset allocation is selecting the securities that should go into your portfolio.

Question 68

Once one's asset allocation plan is developed and securities are selected,these decisions do not have to be made again until there is a major life change.

Question 69

The Wilshire Index reflects the total market value of approximately 50% of all publicly traded stocks in this country.

Question 70

On-line trading is the only valuable investment service available through the Internet.

Question 71

Diversification increases risk.

Question 72

The Internet has made pump-and-dump schemes easier and more effective.

Question 73

The NYSE index includes all stocks listed on the "Big Board."

Question 74

The Standard and Poor's Index includes 30 industrial stocks.

Question 75

The most popular average/index covering stocks listed on the New York Stock Exchange is the New York Stock Exchange Index.

Question 76

Most investment-oriented Web sites include portfolio-tracking tools.

Question 77

A corporation's annual stockholders' report provides financial data and other information related to both past and planned activities.

Question 78

A retired couple can probably bear more risk in their portfolio than a young investor with a secure job.

Question 79

Stockbrokerage firms often do industry analysis.

Question 80

A diversified portfolio should be less risky than putting your money into a single security.