Question 1

An increase in the value of the dollar relative to the yen has a positive effect on the returns of U.S. investors who invest in stocks of Japanese firms.

Accepted Answer

The answer of An increase in the value of the...

Question 2

Companies with strong earnings but limited growth opportunities

Accepted Answer

Companies with strong earnings but limited growth opportunities often distribute a significant portion of their earnings as dividends to shareholders, rather than reinvesting in the company to expand. Therefore, they generally pay high dividends.

Question 3

Stocks related to computers and the Internet are classified as

Accepted Answer

Stocks related to computers and the internet fall under the category of technology stocks or tech stocks.

Question 4

Stocks whose prices are expected to remain stable, or even prosper, when economic activity is slowing down are known as

Accepted Answer

Defensive stocks refer to those stocks that are expected to perform well during economic downturns or recessions. These stocks are typically from industries that provide essential goods and services, such as healthcare, utilities, and consumer staples, and are less influenced by economic cycles. Therefore, they are considered a safe investment choice for investors during uncertain times.

Question 5

Characteristics of established growth companies include all of the following EXCEPT

Accepted Answer

Established growth companies tend to prioritize reinvesting their earnings back into the business for further growth rather than paying out higher dividends to shareholders, therefore they typically have lower dividend payout ratios. A, B, and C are all characteristics commonly associated with established growth companies.

Question 6

American Depositary Receipts (ADRs) are issued against shares of U.S. corporations and are traded on foreign security exchanges.

Accepted Answer

ADRs are issued against shares of non-U.S. corporations and are traded on U.S. security exchanges, allowing U.S. investors to invest in foreign companies without dealing with foreign securities laws and currency conversions.

Question 7

The total-return approach concentrates solely on capital gains over the long term.

Accepted Answer

The total-return approach considers both capital gains and income generated from investments over the long term.

Question 8

Investors seeking current income that tends to increase over time should purchase

Accepted Answer

Income stocks are stocks of companies that pay regular dividends to their shareholders. These dividends tend to increase over time as the company's earnings grow, providing investors with a growing stream of income. Corporate bonds also provide regular income, but their payments are fixed and do not tend to increase over time. Growth and speculative stocks typically do not provide much, if any, current income.

Question 9

Which one of the following is a characteristic of blue chip stocks?

Accepted Answer

Blue chip stocks are characterized by long and stable records of dividends and earnings. A guaranteed minimum annual dividend or high dividend payouts are not defining characteristics of blue chip stocks. High-risk exposure is also not a characteristic of blue chip stocks.

Question 10

Typical characteristics of growth stocks include

Accepted Answer

Growth stocks are characterized by high rates of growth in operations and earnings. This growth is what attracts investors to these stocks, even though they may not pay dividends or perform as well in market downturns. Acquisitions of competing companies are not a necessary characteristic of growth stocks.

Question 11

American Depositary Receipts (ADRs) are issued against shares of U.S. corporations and are traded on foreign security exchanges.

Accepted Answer

ADRs are issued against shares of non-U.S. corporations and are traded on U.S. security exchanges, allowing U.S. investors to invest in foreign companies without dealing with foreign securities laws and currency conversions.

Question 12

Over the period 1900 to 2011, U.S. stocks had the highest rate of return of any country.

Accepted Answer

U.S. stocks had high returns, but other countries like Australia had higher average returns over that period.

Question 13

Which of the following are characteristics of blue-chip stocks?
I. solid balance sheets
II. generous dividend yields
III. immunity from bear markets
IV. some growth potential

Accepted Answer

Blue-chip stocks are typically large, well-established companies that have a solid financial foundation. This includes a strong balance sheet (I) that is backed by consistent earnings and revenue streams. They also often offer generous dividend yields (II) as they tend to be more mature companies with less room for growth than smaller, newer firms. While no company is completely immune from market volatility, blue-chip stocks are generally considered to be less susceptible to steep declines during bear markets (III). Finally, while blue-chip stocks may not have as much growth potential as smaller firms, they may still offer some degree of growth opportunity as they continue to innovate and expand their business (IV).

Therefore, the correct answer is C: I, II and IV only.

Question 14

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

Accepted Answer

Defensive stocks are those that tend to perform well during economic downturns or volatility in the market, as consumers are more likely to continue purchasing their products or services. Walmart is a classic example of a defensive stock as it is a large discount retailer that offers essential goods such as groceries and household items. Consumers are likely to continue shopping at Walmart even during tough economic times, making it a reliable investment choice in times of uncertainty.

Question 15

So-called income stocks pay fixed dividends similar to interest on bonds.

Accepted Answer

The answer of So-called income stocks pay fixed dividends similar...

Question 16

An increase in the dollar relative to the euro has a negative effect on the returns of U.S. investors who invest in European firms.

Accepted Answer

When the dollar increases relative to the euro, European goods become relatively more expensive for U.S. investors. As a result, the returns of U.S. investors who invest in European firms will decrease due to reduced demand for European goods.

Question 17

Which of the following are characteristics of small cap stocks?
I. strong balance sheets
II. annual revenues less than $250 million
III. potential for high returns along with high risk
IV. potentially dramatic changes in their earnings

Accepted Answer

Small cap stocks have annual revenues less than $250 million and are known for potential high returns along with high risk. They may have potentially dramatic changes in their earnings as they are often in the early stages of growth. While they may not always have strong balance sheets like larger companies, some small cap stocks do have strong financials. Therefore, characteristics I, III, and IV are all associated with small cap stocks.

Question 18

The rate of return on a foreign investment is affected by changes in the exchange rates.

Accepted Answer

Fluctuations in currency exchange rates can have a significant impact on the rate of return on a foreign investment. If the currency of the investment's home country depreciates against the currency of the foreign country, the rate of return will decrease. Conversely, if the currency of the investment's home country appreciates, the rate of return will increase. Therefore, changes in exchange rates are a key factor to consider when making foreign investments.

Question 19

The most common reason for an investor to adopt the quality long-term growth investment strategy is for long-term accumulation of capital.

Accepted Answer

The quality long-term growth investment strategy focuses on investing in companies with consistent earnings growth, strong financials, and a competitive advantage. This approach is suited for investors looking to accumulate capital over the long-term rather than seeking short-term gains.

Question 20

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

Accepted Answer

A speculative stock typically refers to a high-risk investment with potential for high reward but also a high likelihood of volatility and uncertainty. Out of the options given, Facebook fits this description the best as it is a technology company in a constantly evolving industry with potential for growth and innovation, but also faces regulatory and privacy issues as well as competition from other tech giants. Apple, Amazon, and Home Depot are all established companies with more predictable performance and lower risk.

Quiz 6: Common Stocks

An increase in the value of the dollar relative to the yen has a positive effect on the returns of U.S. investors who invest in stocks of Japanese firms.

Companies with strong earnings but limited growth opportunities

Stocks related to computers and the Internet are classified as

Stocks whose prices are expected to remain stable, or even prosper, when economic activity is slowing down are known as

Characteristics of established growth companies include all of the following EXCEPT

American Depositary Receipts (ADRs) are issued against shares of U.S. corporations and are traded on foreign security exchanges.

The total-return approach concentrates solely on capital gains over the long term.

Investors seeking current income that tends to increase over time should purchase

Which one of the following is a characteristic of blue chip stocks?

Typical characteristics of growth stocks include

American Depositary Receipts (ADRs) are issued against shares of U.S. corporations and are traded on foreign security exchanges.

Over the period 1900 to 2011, U.S. stocks had the highest rate of return of any country.

Which of the following are characteristics of blue-chip stocks? I. solid balance sheets II. generous dividend yields III. immunity from bear markets IV. some growth potential

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

So-called income stocks pay fixed dividends similar to interest on bonds.

An increase in the dollar relative to the euro has a negative effect on the returns of U.S. investors who invest in European firms.

Which of the following are characteristics of small cap stocks? I. strong balance sheets II. annual revenues less than $250 million III. potential for high returns along with high risk IV. potentially dramatic changes in their earnings

The rate of return on a foreign investment is affected by changes in the exchange rates.

The most common reason for an investor to adopt the quality long-term growth investment strategy is for long-term accumulation of capital.

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