Deck 11: Investment Planning

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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.

Answer 3

True

Question 4

Investing is the process of placing money in some medium such as stocks or bonds in the expectation of receiving some future benefit.

Question 5

Long-term securities are traded only in the primary markets.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

The over-the-counter (OTC)market deals in small,unlisted securities.

Question 12

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

Question 13

Owning common stock represents a debt investment.

Question 14

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

Question 15

Common stock pays interest payments on a quarterly basis.

Question 16

Speculating is a form of investing in which future value and expected returns are highly uncertain.

Question 17

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

Question 18

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

Question 19

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

Question 20

Listed securities are traded on organized exchanges.

Question 21

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

Question 22

NASDAQ employs an all-electronic trading platform to execute trades.

Question 23

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

Question 24

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

Question 25

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

Question 26

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

Question 27

Prices are rising in bear markets,indicating economic optimism.

Question 28

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

Question 29

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

Question 30

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

Question 31

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

Question 32

All OTC stocks are part of NASDAQ.

Question 33

National stock exchanges are part of broker markets.

Question 34

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

Question 35

There are 50 shares in a round lot.

Question 36

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

Question 37

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

Question 38

Mutual funds often sell directly to investors.

Question 39

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

Question 40

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

Question 41

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

Question 42

Stop-loss is an order to sell a stock when the market price reaches or drops below a specified level.

Question 43

The single most important reason for investing is for retirement.

Question 44

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is designed primarily to improve accountability and transparency in the U.S.financial system.

Question 45

Portfolio rebalancing refers to buying and selling activities intended to return a portfolio to its target allocation levels.

Question 46

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

Question 47

Diversification of investments increases risk.

Question 48

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

Question 49

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 50

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

Question 51

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

Question 52

Exchange traded notes face both market risk and the risk of the issuing bank defaulting.

Question 53

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

Question 54

Retired people often choose investments offering high current income with high risk.

Question 55

The Standard and Poor's Index is an industrial average which is based on 30 blue-chip stocks.

Question 56

The total return of a portfolio is influenced far more by specific security selection than asset allocation in the long run.

Question 57

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

Question 58

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

Question 59

In terms of market capitalization,Apple is the biggest company in the world.

Question 60

Online trading is the only valuable investment service available through the Internet.

Question 61

During a bull market:

A) prices go up.
B) prices go down.
C) prices remain stable.
D) investors are pessimistic.
E) economy slows down.

Question 62

If a company's common stock is traded on an exchange,the company is said to be:

A) an exchange member.
B) seated on the exchange.
C) marketed on the exchange.
D) listed on the exchange.
E) licensed by the exchange.

Question 63

Which of the following is a characteristic of an organized securities exchange?

A) They facilitate trading unlisted securities.
B) Municipal bonds are primarily traded in organized exchanges.
C) Pink sheets are commonly used in these markets.
D) The NASDAQ is an example of an organized exchange.
E) Trading in securities is carried out in a physical location.

Question 64

There are a variety of investment vehicles including which of the following?

A) Common stock.
B) Bonds.
C) Preferred and convertible securities.
D) Real estate.
E) All of the above are investment vehicles

Question 65

The _____ is not an organized security exchange.

A) New York Stock Exchange
B) American Stock Exchange
C) Midwest Stock Exchange
D) Pacific Stock Exchange
E) Over-the-Counter Exchange

Question 66

You have been offered an opportunity to buy shares of a diversified collection of securities.You will be investing in:

A) bonds.
B) common stock.
C) mutual funds.
D) real estate.
E) stock opt ions.

Question 67

The SEC requires corporations to issue _____ describing the firm and the security issue it wishes to sell.

A) an advertisement
B) a prospectus
C) an underwriting journal
D) a dealer newsletter
E) none of these

Question 68

Which of the following is not a securities market?

A) Capital market
B) Money market
C) Primary market
D) Secondary market
E) Dow Jones market

Question 69

Securities markets include:

A) capital and money markets.
B) primary and secondary markets.
C) stock exchanges.
D) all of these
E) none of these

Question 70

_____ is a short-term investment activity.

A) Buying life insurance
B) Buying bonds
C) Investing in common stock
D) Speculating in common stock
E) Saving

Question 71

Which of the following securities/investment acts regulates the sale of mutual fund shares?

A) The Securities Act of 1933
B) The Securities and Exchange Act of 1934
C) The Investment Company Act of 1940
D) The Sarbanes/Oxley Act of 2002
E) The Securities and Protection Act of 1970

Question 72

The most common reason given for investing is:

A) enhancing current income.
B) saving for retirement.
C) sheltering earnings from taxes.
D) paying for an expensive vacation.
E) saving for college education.

Question 73

Which of the following types of brokers is most likely to involve an investor trading electronically from his or her personal computer?

A) Full service broker
B) Bank broker
C) Futures broker
D) Online broker
E) Market maker

Question 74

Which of the following is an order to sell a stock when the market price drops to or below a specified level?

A) Market order
B) Limit order
C) Stop loss order
D) Fill or kill order
E) Day order

Question 75

The most important investment prerequisites are:

A) adequate income and savings.
B) adequate income and insurance.
C) adequate insurance and liquidity.
D) an investment plan and professional advice.
E) consistency and risk awareness.

Question 76

Which of the following is a true statement about the Dow Jones Industrial Average?

A) It is based on 30 industrial stocks.
B) It is based on 50 transportation stocks.
C) It is a composite index for the 500 largest industrial publicly traded companies.
D) It is based on 100 utilities stocks.
E) It contains 50 blue chip stocks.

Question 77

Securities sold in the primary markets are usually handled by a(n):

A) commercial banker.
B) broker.
C) investment banker.
D) dealer.
E) none of these

Question 78

The Securities Investor Protection Corporation insures brokerage firm accounts up to:

A) $500,000 per account and $200,000 in cash.
B) $250,000 per account and $100,000 in cash.
C) $1,000,000 per account and $500,000 in cash.
D) $500,000 per account and $250,000 in cash.
E) $500,000 per account and $100,000 in cash.

Question 79

Which of the following is least likely to be an investment objective?

A) Enhance current income
B) Save for a major purchase
C) Pay monthly bills
D) Accumulate funds for retirement
E) Seek shelter from taxes

Question 80

During a bear market,security prices generally:

A) hold value.
B) rapidly increase in value.
C) remain neutral.
D) decline in value.
E) consolidate in value.