Question 1

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's P/E ratio?

Accepted Answer

To calculate the P/E ratio, divide the current stock price by the earnings per share (EPS) for the past year. 
EPS = (Net income - Preferred dividends) / Total outstanding shares
= (1,400,000 - 280,000) / 400,000 
= 3. 
P/E ratio = Stock price / EPS 
= 35 / 3 
= 11.67. 
Therefore, the P/E ratio is 11.67, and the best choice is C.

Question 2

To calculate the total estimate of the  required rate of return on an investment,multiply

Accepted Answer

The estimate of required rate of return is based on the risk-free T-bill rate plus a premium that reflects the inherent risk of the investment. The premium is calculated by multiplying the beta of the investment by the estimated market risk return. Therefore, choice B is the best option. Choices A and C are incorrect because they do not include the risk-free T-bill rate, which is an important component in calculating the required rate of return.

Question 3

The most accurate market index for an investor who invests in large,well-known companies would be the

Accepted Answer

The Standard & Poor's 500 index includes 500 large-cap companies from various sectors, making it a broad representation of the overall stock market. It is widely recognized as a benchmark for the U.S. stock market, making it a suitable choice for investors who invest in large, well-known companies. The Dow Jones Industrial Average, on the other hand, only includes 30 large-cap companies, while the NASDAQ Composite Index is more focused on technology and growth stocks. The Nikkei Dow is a Japanese index, so it may not be relevant for investors who invest in U.S. companies.

Question 4

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's dividend yield?

Accepted Answer

Dividend yield is calculated by dividing the annual dividend by the current stock price. 
Here, Sudsy Soap's annual dividend per share is $0.50. 
Dividend Yield = (Annual Dividend per Share / Current Stock Price) * 100
= (0.50 / 35) * 100
= 1.4%
Therefore, choice A is the correct answer.

Question 5

Which is not a frequently reported index?

Accepted Answer

The Value Line is less frequently reported as a major market index compared to the S&P 500, New York Stock Exchange Composite, and NASDAQ Composite Index, which are widely followed and reported in financial news.

Question 6

Every company registered with the Securities and Exchange Commission must report many financial particulars annually to the SEC by filing a ____ report.

Accepted Answer

The 10-K report is an annual report required by the SEC for every company registered with them. It contains detailed information about the company's financial performance, risks, management, and other key aspects. The other choices (8-K and 13-D) are also required reports but are not filed annually and are typically used for specific events such as major corporate changes or ownership disclosures. Therefore, the correct answer is B) 10-K.

Question 7

ACB,Inc.,has a beta of 1.2.If the market as a whole goes up 15 percent,we would expect ACB's market value to go

Accepted Answer

ACB's market value would go up by 18 percent, which is calculated by multiplying its beta (1.2) by the market's increase (15 percent). 1.2 x 15 = 18.

Question 8

Jackson purchased Logo,Inc.,stock for $30 a share and sold it for $36 a share three years later.Over those three years he received an average annual dividend of $1.The approximate compound yield on this investment was ____ percent.

Accepted Answer

The answer of Jackson purchased Logo,Inc.,stock for $30 a share...

Question 9

The approximate compound yield (ACY) formula provides a measure of the

Accepted Answer

The ACY formula takes into account the effects of compounding and provides an annualized measure of growth for a long-term investment. It does not measure the total return, which includes factors such as dividends or interest payments. Additionally, it is not specific to short-term investments.

Question 10

Of the following sources of information to investors,which is the least helpful in terms of solid,objective information?

Accepted Answer

The annual report, while containing useful information, is often designed as much for marketing purposes as for financial disclosure. It can be less objective and more promotional compared to the other options, which are regulatory documents designed to provide solid, objective information to investors. The prospectus, 10-K, and SEC filings are all required by regulatory authorities and are designed to present factual, objective information about a company's financial condition, risks, and performance.

Question 11

Assuming a market rate risk of 8 percent and a return on Treasury bills of 4 percent,what would the total estimate of the required rate of return be for a stock with a beta of 1.7?

Accepted Answer

The answer of Assuming a market rate risk of 8...

Question 12

Which of the following sources of information about a corporation and its profitability is issued most frequently?

Accepted Answer

The answer of Which of the following sources of information...

Question 13

If U.S.Treasury bills are earning 4 percent and the stock investment you are considering has a potential return of 10 percent,you would be paid a ____ percent return to take the additional risk of investing in the stock.

Accepted Answer

The additional return you would require to take on the risk of investing in the stock is called the risk premium. It is calculated by subtracting the risk-free rate (in this case, the T-bill rate of 4%) from the potential return of the stock (10%). So, the risk premium in this case is 10% - 4% = 6%. Therefore, you would need to be paid an additional 6% return to justify the additional risk of investing in the stock. This means your total expected return from the stock would be 10% + 6% = 16%. Choice B is the closest option as it is the only option that is larger than the risk-free rate and smaller than the potential return of the stock.

Question 14

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's dividend per share?

Accepted Answer

The correct dividend per share for Sudsy Soap is $0.50.

Question 15

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is the dividend payout ratio for Sudsy Soap?

Accepted Answer

The answer of 
Toni and Felix are considering buying stock....

Question 16

The most widely reported security market index is the

Accepted Answer

The Dow Jones Industrial Average (DJIA) is the most widely reported and recognized of the stock market indices. It is often used as a barometer of the health of the U.S. stock market and, by extension, the U.S. economy.

Question 17

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's PEG ratio?

Accepted Answer

The answer of 
Toni and Felix are considering buying stock....

Question 18

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's book value?

Accepted Answer

Sudsy Soap's book value is calculated by subtracting the total liabilities from total assets. In this case, the total assets are $2,100,000 and the total liabilities are $1,400,000. 
Therefore, the book value of Sudsy Soap is $700,000 (2,100,000 - 1,400,000). Option B is the correct choice.

Question 19

Which of the following information about specific companies must be issued only when a new security is issued?

Accepted Answer

A prospectus must be issued only when a new security is issued. Annual reports and 10-K reports are typically issued on an annual basis to provide information to investors about the company's financial performance and operations.

Question 20

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year:
 
-What is Sudsy Soap's price-to-book ratio?

Accepted Answer

The answer of 
Toni and Felix are considering buying stock....

Quiz 14: Investing in Stocks and Bonds

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's P/E ratio?

To calculate the total estimate of the required rate of return on an investment,multiply

The most accurate market index for an investor who invests in large,well-known companies would be the

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's dividend yield?

Which is not a frequently reported index?

Every company registered with the Securities and Exchange Commission must report many financial particulars annually to the SEC by filing a ____ report.

ACB,Inc.,has a beta of 1.2.If the market as a whole goes up 15 percent,we would expect ACB's market value to go

Jackson purchased Logo,Inc.,stock for $30 a share and sold it for $36 a share three years later.Over those three years he received an average annual dividend of $1.The approximate compound yield on this investment was ____ percent.

The approximate compound yield (ACY) formula provides a measure of the

Of the following sources of information to investors,which is the least helpful in terms of solid,objective information?

Assuming a market rate risk of 8 percent and a return on Treasury bills of 4 percent,what would the total estimate of the required rate of return be for a stock with a beta of 1.7?

Which of the following sources of information about a corporation and its profitability is issued most frequently?

If U.S.Treasury bills are earning 4 percent and the stock investment you are considering has a potential return of 10 percent,you would be paid a ____ percent return to take the additional risk of investing in the stock.

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's dividend per share?

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is the dividend payout ratio for Sudsy Soap?

The most widely reported security market index is the

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's PEG ratio?

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's book value?

Which of the following information about specific companies must be issued only when a new security is issued?

Toni and Felix are considering buying stock. They would like to purchase 600 shares of Sudsy Soap stock at $35 a share. Sudsy Soap had the following figures for the past year: -What is Sudsy Soap's price-to-book ratio?