Question 1

Monte Jackson is considering the purchase of XYZ stock and would like to estimate its approximate yield if he holds it 5 years.The current price is $20 and Monte expects it would rise to $30 over the 5-year holding period.The expected dividend is $1.00 each year.

Accepted Answer

The answer of Monte Jackson is considering the purchase of...

Question 2

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-The longer money is not invested during the best months,the [higher | lower] is the percent return.

Accepted Answer

The longer money is invested during the best months, the lower is the percent return. This is because the longer money is kept out of the market, the less time it has to benefit from potential gains.

Question 3

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose?

Accepted Answer

The answer of You have the chance to buy either...

Question 4

Calculate the dividend yield on OPQ stock.Earnings per share are $2.75 and the quarterly dividend is 25 cents.The book value is $15.20 per share while the market value is $25.00.

Accepted Answer

The answer of Calculate the dividend yield on OPQ stock.Earnings...

Question 5

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Municipal bonds are exempt from [income tax | capital gains tax].

Accepted Answer

Municipal bonds are typically exempt from federal income tax, and in some cases state and local taxes as well. However, they are still subject to capital gains tax if sold at a profit.

Question 6

Calculate the earnings per share of a company with the following information?

Accepted Answer

The answer of Calculate the earnings per share of a...

Question 7

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-The yields on municipal bonds are usually [lower | higher] than the returns available from fully taxable issues.

Accepted Answer

Municipal bonds are issued by state and local governments and are generally exempt from federal income tax, and sometimes state and local taxes as well. This tax-exempt status means that the yields on muni bonds are usually lower than the returns available from fully taxable issues.

Question 8

Calculate the approximate yield on the common stock of Bowl Game that Matty Smelt has owned for 4 years.She bought it for $10 per share and sold it for $25.The dividend was $1.50 each year.

Accepted Answer

The answer of Calculate the approximate yield on the common...

Question 9

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-When a bond is sold between coupon payment dates,the [buyer pays the seller | seller pays the buyer] for the accrued interest.

Accepted Answer

The answer of INSTRUCTIONS: Choose the word or phrase in...

Question 10

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

Accepted Answer

Current yield is calculated by dividing the annual interest income by the market price of the bond. Yield to maturity takes into account the bond's price, coupon rate, time to maturity, and the time value of money, and is a more comprehensive measure of a bond's yield. However, the statement specifically mentions dividing annual interest income by market price, which is the calculation for current yield.

Question 11

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-If the value of the underlying stock dropped drastically,the owner of a convertible bond [would still receive $1,000 | would receive the market value of the stock] at maturity.

Accepted Answer

Convertible bonds have a face value, typically $1,000, which the bondholder will receive at maturity, regardless of the stock's market value.

Question 12

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-[General obligation bonds | revenue bonds] are the least risky municipal bond category.

Accepted Answer

General obligation bonds have the backing of the full faith and credit of the issuer, meaning they have the ability to levy taxes to pay back bondholders. This makes them less risky than revenue bonds, which rely on the revenue generated by a specific project or entity.

Question 13

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-The commonly-cited price for a bond is usually its [clean | dirty] bond price.

Accepted Answer

The clean price of a bond is the price of the bond exclusive of any accrued interest, whereas the dirty price includes the accrued interest. Therefore, the commonly-cited price for a bond is the clean bond price.

Question 14

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. 
-Individuals invest in preferred stock for its high [current income | potential gain].

Accepted Answer

Preferred stock is known for providing steady, reliable income in the form of dividends, making option A, "current income," the correct choice. While it is possible for preferred stock to appreciate in value, it is not typically sought out for its potential for capital gain, making option B, "potential gain," an incorrect choice.

Quiz 12: Investing in Stocks and Bonds

Monte Jackson is considering the purchase of XYZ stock and would like to estimate its approximate yield if he holds it 5 years.The current price is $20 and Monte expects it would rise to $30 over the 5-year holding period.The expected dividend is $1.00 each year.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The longer money is not invested during the best months,the [higher | lower] is the percent return.

You have the chance to buy either one of two bonds.The first is a tax-free municipal with a coupon yield of 6.5%.The second is a corporate bond with a yield of 8.5%.Both bonds are rated AA.Your tax rate is 28%.Which would you choose?

Calculate the dividend yield on OPQ stock.Earnings per share are $2.75 and the quarterly dividend is 25 cents.The book value is $15.20 per share while the market value is $25.00.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Municipal bonds are exempt from [income tax | capital gains tax].

Calculate the earnings per share of a company with the following information?

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The yields on municipal bonds are usually [lower | higher] than the returns available from fully taxable issues.

Calculate the approximate yield on the common stock of Bowl Game that Matty Smelt has owned for 4 years.She bought it for $10 per share and sold it for $25.The dividend was $1.50 each year.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -When a bond is sold between coupon payment dates,the [buyer pays the seller | seller pays the buyer] for the accrued interest.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Annual interest income divided by market price of the bond equals [current yield | yield to maturity].

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -If the value of the underlying stock dropped drastically,the owner of a convertible bond [would still receive $1,000 | would receive the market value of the stock] at maturity.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -[General obligation bonds | revenue bonds] are the least risky municipal bond category.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -The commonly-cited price for a bond is usually its [clean | dirty] bond price.

INSTRUCTIONS: Choose the word or phrase in [ ] which will correctly complete the statement. -Individuals invest in preferred stock for its high [current income | potential gain].