Question 1

ADRs
I.are shares of U.S.companies traded on foreign exchanges.
II.are shares of foreign companies traded on U.S.exchanges.
III.pay dividends in U.S.dollars if they pay dividends.
IV.are subject to exchange rate risk.

Accepted Answer

ADRs (American Depositary Receipts) are shares of foreign companies traded on U.S. exchanges, they pay dividends in U.S. dollars, and they are subject to exchange rate risk.

Question 2

Aggressive stock management

Accepted Answer

Aggressive stock management typically involves active trading in the short-term in order to maximize capital gains. It is a high-risk strategy that requires close monitoring of market trends and quick decision-making. Holding speculative stocks for the long-term or concentrating solely on dividend yield may not fit within the aggressive stock management approach. While long-term growth potential may be a consideration, it is not the primary focus in this type of strategy.

Question 3

Which of the following strategies appeal to investors who place primary emphasis on the storage of value aspects of an investment?
I.buy and hold
II.short-term trading
III.quality long-term growth
IV.consistent dividend record

Accepted Answer

Investors who emphasize the storage of value in their investments typically prefer strategies that offer stability and long-term growth potential. "Buy and hold" and "quality long-term growth" strategies focus on retaining and gradually increasing value over time. Investments with a "consistent dividend record" provide regular income, which can also be seen as a way to preserve value. Short-term trading, on the other hand, is more about capitalizing on market volatility and does not primarily focus on the storage of value.

Question 4

Which category of stocks represents the highest level of risk?

Accepted Answer

Small-cap stocks represent the highest level of risk among the four categories listed. These stocks are issued by small companies with a market capitalization of between $300 million and $2 billion. Their size and lack of a track record may make them volatile and prone to economic downturns or company-specific risk factors.

Question 5

Aggressive stock management focuses on the pursuit of

Accepted Answer

Aggressive stock management focuses on generating short-term capital gains through actively buying and selling stocks. Dividend income and long-term capital gains are not the primary focus.

Question 6

Which of the following are advantages of the buy and hold strategy?
I.rapid accumulation of wealth
II.low transaction costs
III.capital gains taxed at the long-term rate
IV.portfolio requires less time and energy to manage than for most other strategies

Accepted Answer

Advantages of the buy and hold strategy include low transaction costs, capital gains taxed at the long-term rate, and requiring less time and energy to manage than most other strategies. Rapid accumulation of wealth is not necessarily an advantage of the buy and hold strategy, as it is a long-term approach that may not result in quick gains. Therefore, options A and D are not correct. Option B only includes two of the advantages listed, while option C includes all three, making it the best choice.

Question 7

Explain why every stock portfolio should include some defensive stocks.

Accepted Answer

The answer of Explain why every stock portfolio should include...

Question 8

Advantages of using American Depositary Receipts to participate in foreign markets include
I.lower transaction costs than for direct foreign stock purchases.
II.reduced exposure to foreign exchange risk.
III.dividends are paid in U.S.dollars.
IV.quotations are readily available from U.S.sources such as Yahoo Finance or MSN Money.

Accepted Answer

ADRs offer lower transaction costs than direct foreign stock purchases, reduced exposure to foreign exchange risk, and dividends paid in U.S. dollars.

Question 9

Which of the following best fits the description "blue chip stock"?

Accepted Answer

Blue chip stocks generally refer to large, stable companies with a long history of consistent earnings and a strong reputation. General Electric fits this description as it is a well-established conglomerate with a diverse range of businesses and a track record of steady performance. Facebook, Under Armour, and Chipotle Mexican Grill are all relatively newer companies with more volatility in their earnings and a less established reputation, and therefore would not typically be considered "blue chip" stocks.

Question 10

Amanda purchased stock in a German firm at a price per share of 35 euros when the U.S.$/euro exchange rate was $1.20.After six months, Ann sold the stock for 37 euros when the U.S.$/euro exchange rate was $1.10.The stock does not pay a dividend.What is Ann's rate of return on this investment?

Accepted Answer

The answer of Amanda purchased stock in a German firm...

Question 11

One characteristic of mid-cap stocks is that they

Accepted Answer

Mid-cap stocks are typically companies that have a market capitalization (total value of shares outstanding) between $2 billion and $10 billion. They are considered to be fairly good-sized companies, but not as large and established as large-cap stocks. Mid-cap stocks offer attractive return opportunities, as they have potential for growth and are typically more stable than small-cap stocks, but not as well-known and established as large-cap stocks.

Question 12

Which one of the following investment strategies would NOT appeal to an investor who is most concerned with storage of value?

Accepted Answer

An investor who is most concerned with storage of value would not be interested in speculation and short-term trading, as it involves a higher level of risk and uncertainty, and may not necessarily protect the value of their investment over the long-term. The other investment strategies, such as buy-and-hold, high income, and quality long-term growth, are all more focused on preserving and growing the value of an investment over time.

Question 13

The common stock investment strategy that is the most basic strategy and is popular with conservative, quality-conscious individuals looking for competitive returns over the long run is the

Accepted Answer

The buy-and-hold strategy is a basic, long-term investment strategy where an investor buys stocks and holds onto them for an extended period of time, typically years or even decades. This strategy is considered conservative and is popular with quality-conscious individuals looking for competitive returns over the long run. The other choices such as current income strategy, growth strategy, and speculation and short-term trading strategy are not suitable for conservative, quality-conscious individuals looking for competitive returns over the long run.

Question 14

The U.S.stock market

Accepted Answer

The statement says that the U.S. stock market is decreasing as a percentage of the world's equity market, making option C the correct choice. Option A is incorrect because the U.S. stock market currently represents about 55% of the world's equity market, not 66%. There is no information provided in the statement to support option B, so it is incorrect. Option D is misleading because although there are over 25,000 publicly traded stocks in the U.S., it doesn't provide any relevant information to answer the question.

Question 15

Income stocks are well suited for retirees because

Accepted Answer

Income stocks are well-suited for retirees because they tend to provide a reliable and growing stream of dividend income, which can help supplement retirement income and keep up with inflation over time. These dividends tend to increase over time, providing a hedge against inflation and offering greater stability compared to stocks that do not pay dividends. Additionally, dividend yields for income stocks tend to exceed bond yields, making them an attractive choice for retirees looking for higher income than what bonds can offer. However, dividend income is not tax-free, so retirees should be aware of any tax implications when investing in income stocks.

Question 16

Which strategy applies to investors who fund long-term goals with high-quality stocks which they retain for the entire investment period?

Accepted Answer

The strategy of buying and holding high-quality stocks for the long-term is referred to as "buy and hold." This strategy involves choosing solid, established companies that are likely to grow over time and holding them for the duration of the investment period, regardless of short-term ups and downs in the stock market. This approach is well-suited to investors with long-term goals, such as building a retirement portfolio, as it allows them to benefit from the power of compounding without being distracted by short-term market volatility.

Question 17

Which of the following best fits the description "defensive stock"?

Accepted Answer

Defensive stocks refer to companies that perform well even during economic recessions or downturns. Walmart, as a discount retailer, tends to perform well during tough economic times as consumers opt for more affordable options. Therefore, it is a good example of a defensive stock. Facebook, Samsung, and Tesla are not necessarily defensive stocks as their performance is more closely tied to the overall state of the economy and consumer spending habits.

Quiz 6: Common Stocks

ADRs I.are shares of U.S.companies traded on foreign exchanges. II.are shares of foreign companies traded on U.S.exchanges. III.pay dividends in U.S.dollars if they pay dividends. IV.are subject to exchange rate risk.