Deck 3: Investment Information and Securities Transactions

Question 1

An internet tool that selects stocks to meet specific criteria such as dividend payout or price earnings ratio is known as a(n)

A) advisor.
B) compiler.
C) screener.
D) sorter.

Answer 1

C

Question 2

A listing of a firm's major product lines and projections of future sales would both be considered descriptive information.

Answer 2

False

Question 3

Which of the following actions are possible on the internet?

A) stock trading directly between individual investors without the use of a brokerage
B) accessing financial statements for publicly traded companies
C) accessing historical data on popular indexes
D) only B and C

Answer 3

D

Question 4

The cost of using industry sponsored websites such FINRA usually exceeds the benefits for small investors.

Question 5

Descriptive information might include the company's lines of business, a list of major competitors, and recent changes in management.

Question 6

For most stocks, charts and tables of historical prices are only available through subscription services.

Question 7

Reviewing industry and company information may provide guidance on the future outlook of a particular firm.

Question 8

The tools and calculators available on the FINRA website are useful, but quite expensive to use.

Question 9

Information that can be found on the Internet at no cost includes
I) P/E ratios.
II) recent news about a company.
III) financial statements.
IV) future earnings and stock prices.

A) I and IV only
B) II and III only
C) I, II and III only
D) I, II, III and IV

Question 10

An investor who mistakenly buys the wrong stock because the symbols are similar has 24 hours to undo the trade.

Question 11

Current price information on shares of a company's stock is often accompanied by statistics on the recent price behavior of that stock.

Question 12

Investors who are aware of current economic, political, and market events tend to make better investment decisions.

Question 13

Most brokers charge higher commissions for on-line trades than for telephone transactions.

Question 14

What are some of the tools available to investors on the internet (name at least 4)?

Question 15

Which one of the following can be considered a pitfall for investors new to on-line trading?

A) On-line trading is fast and efficient.
B) On-line investors tend to trade too frequently.
C) On-line trading is available to the average investor.
D) On-line investors pay lower costs per trade than investors using a broker.

Question 16

On-line trading has greatly lowered the cost of buying and selling stock as well as greatly increasing the speed of transactions.

Question 17

U.S. Census Bureau publishes financial information.on manufacturers broken down by industry and size.

Question 18

Individuals can now use the Internet to buy and sell
I) stocks.
II) bonds.
III) mutual funds.
IV) stock options.

A) I and IV only
B) II and III only
C) I, II and III only
D) I, II, III and IV

Question 19

Analytical information would include such information as estimates of growth in sales and future earnings.

Question 20

You can utilize the Internet to develop financial plans and goals, analyze and select individual investments and organize your portfolio.

Question 21

Which one of the following services provides bond ratings?

A) Standard & Poor's
B) Yahoo Finance
C) Value Line
D) Bureau of the Public Debt Online

Question 22

Which of the following is a general rather a financial newspaper?

A) The New York Times
B) Investor's Business Daily
C) The Wall Street Journal
D) Barron's

Question 23

A "pump and dump" scheme involves buying shares of stock, hyping that stock via the Internet and then quickly selling the shares at a profit.

Question 24

Which of the following is usually available on a companies website?

A) brokerage reports
B) annual reports
C) back-office reports
D) red herrings

Question 25

Which of the following sites is especially valuable for information concerning mutual funds?

A) HYPERLINK "http://www.investopedia.com/" www.investopedia.com
B) HYPERLINK "http://www.morningstar.com/" www.morningstar.com
C) www.moody's.com
D) HYPERLINK "http://www.bondsonline.com/" www.bondsonline.com

Question 26

The published analysis and recommendations of an individual brokerage firm is called a

A) prospectus.
B) comparative data source.
C) back-office research report.
D) broker's subscription report.

Question 27

Investors can usually find the financial statements of a firm on the firm's website.

Question 28

Standard & Poor's and Mergent both publish extensive data on bonds.

Question 29

Which of the following types of information is NOT available from printed publications?

A) price quotations for stocks of major companies
B) stories concerning business leaders
C) interest rates offered by local and national banks
D) real time price quotes for widely held stocks and exchange traded funds

Question 30

All the Standard & Poor's indexes are based on the total market values of the companies rather than on the price of a single share.

Question 31

An index measures the current value of a group of stocks in relation to a base value established previously.

Question 32

Charting is the technique of

A) plotting the performance of a security over time.
B) sorting through databases of securities to select one based on certain parameters.
C) monitoring a stock based on the underlying economic conditions.
D) determining the amount of money that must be saved based on a given financial goal.

Question 33

Recommendations of "strong buy, buy, hold, reduce, sell" are most likely to be found in

A) brokerage back.-office reports.
B) Yahoo! Finance.
C) Kiplinger Washington Letter.
D) Barron's.

Question 34

The Dow Jones Corporate Bond Index and the Dow Jones Industrial Average are both price- weighted averages whose divisors are adjusted periodically to maintain continuity.

Question 35

Which one of the following web sites should you utilize to review the financial information in a company's 10-K report?

A) SEC's Edgar website
B) valueline.com
C) wsj.com
D) finance.yahoo.com

Question 36

The FD in Regulation FD refers to

A) financial disability.
B) fair disclosure.
C) financial disclosure.
D) fair dividends.

Question 37

Assume you wanted to find the most current price for Home Depot's stock. Your most likely source would be

A) Yahoo Finance.
B) Investor's Business Daily.
C) The Granville Market Letter.
D) The Wall Street Journal.

Question 38

Which one of the following is NOT published by the U.S. Government?

A) Federal Reserve Bulletin
B) Survey of Current Business
C) Kiplinger Washington Letter
D) Economic Report of the President

Question 39

Supersites that accumulate tremendous amounts of investing information that typically includes price history, investment screening tools and other personal finance features are known as

A) subscription services.
B) comparative data sources.
C) financial portals.
D) institutional news sites.

Question 40

Subscription letters are

A) sometimes geared to specific industries and companies.
B) available free on the Internet.
C) published on an annual basis.
D) descriptive in nature but do not offer investment advice.

Question 41

Averages and indexes differ from one another in that an index

A) is the arithmetic average price behavior of a group of stocks at a given point in time.
B) measures the current price behavior of a group of stocks in relation to a base value set at an earlier point in time.
C) is of value in-and-of itself, whereas an average must be compared to a historical figure to have any meaning.
D) always moves up before a corresponding average moves up, and always moves down before a corresponding average moves down.

Question 42

The Dow-Jones Corporate Bond Index is entirely based on industrial firms.

Question 43

Which of the following indexes would best reflect the performance of a large, diversified portfolio with equal amounts of money invested in each company.

A) the S&P 500 Index
B) the Russell 3000
C) the NASDAQ 100
D) the Value Line Composite Index

Question 44

The Dow Jones Corporate Bond Indexes is based

A) the yield to maturity of bonds in the index.
B) annual rates of return and assume the bonds were purchased one year ago and sold today.
C) the interest rates offered on a sample of newly issued bonds.
D) the closing prices of bonds in the index.

Question 45

Suppose that Pfizer and Boeing are part of the Dow-Jones Industrial Average. If on a given day Boeing closes at $320 and Pfizer at $40

A) the difference in price will not affect the Average.
B) the Average will include 8 shares of Pfizer for each share of Boeing.
C) the effect of each stock on the Average cannot be determined without knowing the number of shares outstanding for each company.
D) changes in the price of Boeing shares will have 8 times the effect on the Average as changes in the price of Pfizer.

Question 46

EAFE stands for

A) Europe, Asia, Far East.
B) Europe, Australia, Far East.
C) England, America, Far East.
D) England, America, France, European Community.

Question 47

Which one of the following statements is true concerning bonds?

A) A bond yield represents only the interest earned on a bond.
B) Bond yield data is more useful to an investor when compared over time.
C) A bond's yield remains constant even when a bond is sold prior to maturity.
D) Bonds with similar characteristics generally have widely disparate bond yields.

Question 48

Which of the following statements about the Dow Jones Industrial Average are correct?
I) Higher-priced stocks tend to affect the average more than lower-priced stocks.
II) A one-point change in the DJIA correlates to a $1 change in average share value.
III) Changes in the DJIA are made to reflect company mergers and acquisitions.
IV) The DJIA divisor was determined when the average was created and remains constant.

A) I and III only
B) II and IV only
C) I, III and IV only
D) I, II, III and IV

Question 49

The Dow Jones Industrial Average and the Standard & Poor's Industrial Index have a number of similarities and differences. Discuss at least two major similarities and major differences between these two market indicators.

Question 50

The value of the Value Line Composite Index

A) divides the sum of the closing share prices by an adjusted divisor.
B) divides the sum of the closing share prices by a divisor and then multiplying the quotient by 100.
C) considers only the percentage changes in the prices of the stocks in the index.
D) adjusts the number of shares in each stock to produce an equal weighting.

Question 51

Assume that the S&P 500 composite stock index closes at 2,500. This means that

A) the average stock in the index is selling for $25.00.
B) an investor would have to pay $2,500 to purchase one share of each of the stocks represented in the index.
C) The average value of a company reflected in the Index has doubled from when the Index was at 1,250.
D) the share prices of the stocks in the index have risen 25 times since the 1941-1943 base period.

Question 52

The Dow Jones Industrial Average (DJIA) consists of 30 stocks whose price behavior

A) typically has little correlation with the rest of the stock market.
B) broadly reflects the overall price behavior of the stock market.
C) reflects the changes in value of manufacturing stocks only.
D) leads the movements in the general economy by one to two weeks.

Question 53

Which of these market indexes follows the largest number of companies?

A) S&P 500 index
B) Nasdaq composite index
C) Dow Jones Industrial Average
D) Nasdaq 100

Question 54

The Value Line Index is a value weighted index based on a small sample of the 1700 stocks covered by the Value Line investment reports.

Question 55

Stock market averages reflect the arithmetic average price behavior of a group of stocks

A) at a given point in time.
B) relative to a base value set at an earlier point in time.
C) relative to other indexes.
D) relative to a base price of 100.

Question 56

In addition to the Dow Jones Industrial Average, the Standard & Poor's 500 and NASDAQ indexes are widely quoted measures of market performance.

Question 57

The Dow Jones Industrial Average (DJIA) is based on the prices of

A) 30 stocks.
B) 100 stocks.
C) 500 stocks.
D) 200 stocks.

Question 58

Which one of the following statements is correct?

A) The S&P 500 Index is based on 500 large companies that trade on U.S. exchanges.
B) Because of mergers and bankruptcies, the S&P 500 Index no longer contains 500 stocks.
C) The S&P 500 Index is carefully constructed to reflect the values of large, medium and small capitalization companies.
D) The S&P 500 is based on the 500 largest U.S. companies as measured by market value.

Question 59

Which one of the following indexes reflects a large sample of small, medium sized and large companies?

A) NYSE composite
B) DJIA
C) Russell 3000
D) Value Line composite

Question 60

Which one of the following is a measure of the performance of small companies?

A) Russell 2000
B) Russell 1000
C) Russell 3000
D) Value Line 1700

Question 61

Regulation FD requires firms to simultaneously disclose material information, such as earnings forecasts and other relevant information, to investment professionals and the general public.

Question 62

The practice of encouraging a client to trade frequently in order to generate commissions for the broker is known as

A) churning.
B) flipping.
C) day trading.
D) momentum investing.

Question 63

Holding securities in street name

A) makes the trading of securities easier and more efficient for individual investors.
B) allows the brokerage firm to sell securities without the customers approval.
C) enables the brokerage firm to collect the stock dividends as compensation for their services.
D) means that the brokerage firm actually owns the securities.

Question 64

A report describing the transactions in an account, listing the dividend and interest payments received, and detailing the current holdings is called a

A) prospectus.
B) red herring.
C) statement.
D) street certificate.

Question 65

The basic function of stockbrokers is to execute client orders at the best possible price.

Question 66

Trading stocks is much faster and less complicated if an individual investor has possession of the actual stock certificates.

Question 67

When deciding between a discount or full service brokerage, the investor should consider

A) trading costs.
B) her comfort level making unassisted investment decisions.
C) her awareness of potential investment opportunities.
D) all of the above.

Question 68

Investors who choose to hold stock certificates can receive or submit them electronically in pdf form.

Question 69

Which one of the following statements concerning stock trades is correct?

A) Brokerage firms send customer orders to a market maker on the floor of the NYSE.
B) Confirmation of a trade is transmitted directly from the NYSE to the customer who placed the order.
C) A broker transmits OTC orders from a customer directly to a floor broker in the OTC market.
D) Brokerage firms generally hold securities in street name so they can be transferred without the customer's signature.

Question 70

A limit order is an order to sell at the limit price or less.

Question 71

A limit order is an order to buy at the limit price or less.

Question 72

Shares of stock owned by an individual but held in a brokerage firm's name for ease of trading are said to be held in street name.

Question 73

Unless the investor has requested another arrangement, cash from dividends and the sale of stock is normally

A) deposited in a Money Market Account offered by the brokerage.
B) automatically reinvested in more stock.
C) direct deposited to the investor's bank account.
D) held in escrow by the brokerage until it is be reinvested.

Question 74

Which one of the following statements about stockbrokers is correct?

A) Stockbrokers act as dealers in the securities they trade.
B) Stockbrokers must be licensed by the Securities and Exchange Commission.
C) Stockbrokers are regulated by financial consultants.
D) Stockbrokers execute trades on the floor of the New York Stock Exchange on behalf of account executives.

Question 75

Which is the correct order of events when an individual buys a stock through a brokerage firm?
I) The order is transmitted to the main office of the brokerage firm.
II) The customer places the order with their local stockbroker.
III) The confirmation of the order is sent to the broker placing the order.
IV) The order is sent to the floor of the exchange.

A) I, II, III, IV
B) II, I, III, IV
C) II, IV, I, III
D) II, I, IV, III

Question 76

In recent years, the distinctions between discount, premium discount, and full-service brokers

A) have been regulated into law.
B) have become increasingly well defined.
C) have been somewhat blurred.
D) mainly concern whether or not the brokerage offers online trading.

Question 77

Why are market averages and indexes useful to investors?

Question 78

Brokerage firms are not allowed to make specific buy or sell recommendations to their clients.

Question 79

A brokerage firm which provides analyst reports, investment advice and information as well as online brokerage services is called a(n)

A) premium discount broker.
B) full-service broker.
C) basic discount broker.
D) electronic broker.

Question 80

Dividends earned on securities held in street name by the brokerage are reported to the Internal Revenue Service and are considered taxable income to the investor.