Deck 15: Investing in Stocks

Question 1

NASDAQ has less stringent trading requirements than the organized exchanges and tends to attract newer,high-tech companies.

Answer 1

True

Question 2

People with seats on the NYSE who execute stock trades for others are called

A)day traders.
B)floor traders.
C)stock traders.
D)commission traders.

Answer 2

floor traders.

Question 3

Some traders,called specialists,help to make a market in stocks by taking the same position as those who want to buy or sell the stock.

Answer 3

False

Question 4

What is the highest price paid for a share of Coca Cola stock in the last 52 weeks?

A)$40.90
B)$45.26
C)$40.31
D)$1.12

Question 5

Approximately how much did Clorox earn per share of common stock during the last year?

A)$1.16
B)$2.00
C)$)26
D)$6.35

Question 6

How many shares of Brady A were traded the previous day?

A)1,723
B)17,230
C)172,300
D)1,723,000

Question 7

The largest stock exchange in the United States is the ________.

Question 8

Which of the following is not a good source of current stock quotations?

A)Newspapers,such as The Wall Street Journal
B)Magazines,such as Fortune
C)News television networks,such as CNBC
D)Web sites

Question 9

An investment in stock requires all but

A)cash.
B)time.
C)risk.
D)luck.

Question 10

The most up-to-date quotes of stock prices may be found in The Wall Street Journal.

Question 11

Floor traders on the NYSE are willing to trade stocks for others and earn a commission for doing so.

Question 12

The daily stock quotations found in most large newspapers will tell you the closing price per share of stock for the previous day's trading,the range of prices the stock traded the previous day,and a range of trading prices for the last year.

Question 13

The stock exchange which is the largest in terms of dollar volume is the

A)NYSE.
B)AMEX.
C)NASDAQ.
D)regional exchanges.

Question 14

Computer systems that match up purchases and sales of stocks even at night when the other exchanges are closed are

A)NASDAQ.
B)the over-the-counter (OTC)markets.
C)electronic communication networks.
D)the regional stock exchanges.

Question 15

The American Stock Exchange (AMEX)is the largest of the physical stock exchanges.

Question 16

The stock exchange with the most stringent listing requirements is the

A)NASDAQ.
B)AMEX.
C)NYSE.
D)regional exchanges.

Question 17

On the over-the-counter market trades are executed by

A)market-makers.
B)day traders.
C)floor traders.
D)specialists.

Question 18

The ________ is/are not a physical location,but rather an electronic communications network to buy and sell stocks.

A)NYSE
B)AMEX
C)NASDAQ
D)regional exchanges

Question 19

If you had 100 shares of CitiGroup,how much would you expect to receive in dividends annually?

A)$176
B)$360
C)$1,100
D)$76

Question 20

The daily stock quotations found in most large newspapers will not tell you the annual dividends paid per share of stock.

Question 21

In getting recommendations from brokers and analysts,you need to be careful that frequent suggestions to buy or sell are not being made in order to generate revenues for these traders.

Question 22

Compared to discount brokers,full service brokers

A)give stock advice to their clients.
B)execute stock trades faster.
C)charge competitive rates.
D)seldom meet with clients.

Question 23

If you don't need advice or other services offered,you are better off using a discount broker or Internet broker rather than a full-service broker.

Question 24

You can currently borrow up to 75% of stock transactions under today's margin rate.

Question 25

Which of the following stocks is the best value considering only the dividend it pays?

A)BlackDeck
B)Boeing
C)BoWater
D)CitiGroup

Question 26

A market order is normally executed much more quickly than a limit order.

Question 27

Fees charged by brokerage firms

A)are set by the NYSE.
B)are set by the Federal Reserve.
C)are set by the National Association of Securities Dealers.
D)vary according to the services offered.

Question 28

A margin call is a request from a brokerage firm for the investor to increase the cash in the account in order to bring the margin back up to the minimum level.

Question 29

A PE of 10 means that the firm's stock price is ten times the firm's

A)earnings per share.
B)book value.
C)net income.
D)dividends.

Question 30

A discount brokerage firm executes transactions and provides investment advice at a price less than that of full-service brokers.

Question 31

Limit orders can only be placed for a short period of time,usually a week or less.

Question 32

What was the closing price per share for BlackHills on the day before the trading shown on this listing?

A)$29.19
B)$35.25
C)$34.61
D)$35.89

Question 33

Some stock brokers or analysts encourage frequent buying and selling of your securities which may cause you to

A)increase your profit margin.
B)pay less commissions.
C)incur additional tax liabilities.
D)reduce your risk of loss.

Question 34

When you buy a stock on margin,your gain is magnified if the stock goes up in value.

Question 35

An odd lot is the purchase of less than 100 shares of stock.

Question 36

A company's earnings are $3 per share,its dividend is $2 per share,and its stock price is $30 per share.Its PE ratio is

A)15.
B)10.
C)1)5.
D)33.

Question 37

On-line trading of stocks is not only less expensive than using traditional brokers,but is usually more convenient too.

Question 38

A stop order is a special form of limit order; it is an order to execute a transaction when the stock price reaches a specified level.

Question 39

If you want recommendations you can

A)trade with an online broker.
B)open an account at a full-service brokerage firm.
C)visit the SEC Web site.
D)contact a discount broker.

Question 40

Stocks are usually bought or sold in round lots,which are multiples of $100.

Question 41

A ________ order is an order to execute a transaction to buy or sell a stock at its prevailing price.

A)limit
B)stock
C)market
D)written

Question 42

A round lot of stock is ________ shares.

A)10
B)100
C)$100 worth of
D)$1,000 worth of

Question 43

A ________ is an order for a brokerage firm to sell a stock when the price falls to a specified level.

A)stop order
B)buy stop order
C)sell stop order
D)go order

Question 44

The Federal Reserve currently limits the margin rate,the amount that can be borrowed from the brokerage firm,to ________ percent.

A)40
B)50
C)60
D)75

Question 45

To start an online brokerage account,you need to do all of the following except

A)follow instructions to set up an account.
B)mail or deposit cash in an account.
C)go to the Web site.
D)deposit a minimum number of shares already owned.

Question 46

A ________ order is an order to execute a transaction to buy or sell a stock only if the price is within the range specified.

A)limit
B)stock
C)market
D)written

Question 47

You made a $10,000 stock purchase on margin (50%).You put $5,000 into your account initially to cover the purchase.Your stock has declined in value to $7,000 and you receive a margin call.How much cash must you put into your account as a result of the margin call?

A)$1,500
B)$3,000
C)$5,000
D)None-you already have $5,000 in your account.

Question 48

If you are a day trader you would probably utilize a(n)

A)discount brokerage firm.
B)full-service brokerage firm.
C)online brokerage service.
D)commercial bank trust department.

Question 49

A ________ is an order for a brokerage firm to buy a stock when the price rises to a specified level.

A)stop order
B)buy stop order
C)sell stop order
D)go order

Question 50

You bought IBM stock at $70 per share.It is now $120 a share.You think it could go higher but you are nervous that it could go down and you would lose your gains.To protect your gains but still give yourself the chance to make future profits you could place a

A)market order.
B)sell stop order at $100 a share.
C)buy stop order at $100 a share.
D)sell stop order at $150 a share.

Question 51

The purchase of 48 shares of stock is considered a(n)________ transaction.

Question 52

A stock purchased at a price of $22 per share,has risen to $46 per share.You wish to avoid losing your profit; therefore,you should put in a sell stop order at a price of
(a)$22 per share
(b)$40 per share
(c)$43 per share
(d)$46 per share

Question 53

A brokerage firm that executes your transactions without offering investment advice is a(n)________.

Question 54

All of the following are odd lots except

A)99 shares.
B)189 shares.
C)200 shares.
D)970 shares.

Question 55

With an online brokerage firm,you have all of the following except

A)money market fund for uninvested cash.
B)a personal sales representative to answer your questions.
C)quick and convenient trades.
D)very low cost trades.

Question 56

T is the ________ for American Telephone and Telegraph Company.

Question 57

Which of the following is the most risky?

A)Buying stocks online
B)Buying on margin
C)Buying from a broker
D)Buying a bond

Question 58

A ________ symbol is used to identify a stock for trading purposes.

A)company
B)ticker
C)graphic
D)numeric

Question 59

Compare and contrast a full-service brokerage firm to a discount brokerage firm.

Question 60

If you purchase stock ________ you are doing so with a portion of the funds borrowed from your broker.

Question 61

Economic growth,as measured by increases in the gross domestic product (GDP)signals the start of a bull market where stock prices are bound to rise.

Question 62

The means by which the U.S.government imposes taxes on individuals and corporations and by which it spends its money is the ________ policy.

A)taxing
B)fiscal
C)financial
D)spending

Question 63

Fiscal policy,the means by which the U.S.government imposes taxes on individuals and corporations and spends its money,has an impact on spending and thus an impact on the stock of some companies.

Question 64

One of the most commonly used measures of inflation is the

A)gross domestic product.
B)fiscal policy.
C)consumer price index.
D)inflation factor.

Question 65

A measure of inflation that represents prices of various products,such as groceries,household products,housing,and gasoline is the ________ index.

A)consumer price
B)cost of living
C)inflationary
D)household

Question 66

Is investing on margin what the average investor should do?

Question 67

The demand for which of the following will decrease the most with a weak economy?

A)Cereal
B)Bread
C)Boats
D)Paper towels

Question 68

When economic conditions are weak,the aggregate demand for products and services

A)declines.
B)increases.
C)remains the same.
D)may either decline or increase.

Question 69

How much cash would you need to purchase 500 shares of stock at $21 per share plus brokerage commissions of $125,if you purchase on margin and the margin requirement is 50%?
(a)$10,625
(b)$5,312.50
(c)$10,500
(d)$5,250

Question 70

Stocks would be most favorably affected by

A)a decline in interest rates and a decline in inflation.
B)an increase in interest rates and a decline in inflation.
C)a decline in interest rates and an increase in inflation.
D)an increase in interest rates and an increase in inflation.

Question 71

Technical analysis and fundamental analysis are methods commonly used by investors to value stocks.

Question 72

Three hundred shares of stock are purchased on margin at a price of $42 per share plus $150 in brokerage commissions at a time when the margin requirement is 50 percent.How much additional cash would you need to deposit with your broker if the price of the stock dropped to $37 per share?
(a)$825
(b)$1,500
(c)$1,650
(d)$5,550

Question 73

Which of the following actions of the U.S.government could not be considered part of fiscal policy?

A)Federal Reserve open market operations
B)The Tax Relief Act of 2001
C)Operation Enduring Freedom
D)Creating the Department of Homeland Security

Question 74

When corporate taxes rates are ________,the after-tax earnings of corporations are ________,which means ________ money for shareholders.

A)increased; decreased; more
B)decreased; increased; more
C)increased; increased; more
D)decreased; decreased; less

Question 75

Interest rates can affect economic growth and therefore have a direct impact on stock prices.

Question 76

When aggregate demand by consumers ________,firms produce ________ products to accommodate the demand.

A)rises; less
B)rises; more
C)declines; more
D)All of the above.

Question 77

Low interest rates tend to entice investors into the stock market where they can achieve better returns.

Question 78

Generally,stocks perform better when interest rates are

A)low.
B)high.
C)average.
D)Stocks are unaffected by interest rates.

Question 79

The income statement for a company is like a budget in that it shows how much money the company would like to have made in a given accounting period.

Question 80

The two parts of a company's balance sheet: (1)assets and (2)liabilities and shareholder's equity,must be equal or in balance.